Insure Enough

“I’m afraid that at this stage we are like most industries, waiting for the so-called megaprojects to come online, and the downstream effect that will result,” Henri Mittermayer, Managing Director of Hollard Moçambique, told TBY. Having opened its doors back in 2001, Hollard enjoyed strong growth, but, along with concerns over delays in the coming online of several megaprojects, worries that this small, emerging market is also becoming overcrowded. “In the last five years, the Ministry of Finance has awarded another 10 insurance licences,” Mittermayer continued, adding that there is a real danger that, “smaller companies are going to battle to get into the market and resort to buying market share at drastically reduced rates.”

The Mozambican Insurance Supervision Institute (ISSM) oversees the sector, which is composed of 18 insurance firms and over 60 brokers. Today’s Mozambican insurance sector is dominated by corporate and industrial policies associated with energy-related infrastructure, and despite new entrants the sector remains dominated by a few large players, with three entities holding over three-quarters of the market. According to a Research and Markets report titled “Insurance Industry in Mozambique 2015 – Key Trends and Opportunities to 2018,” Mozambique’s insurance sector enjoyed a CAGR of 26.4% from 2009 to 2013, a reality that the regulator puts down to efforts made by operators to educate the general public.

One firm that is keen to seek out new growth areas other than in the oil and gas area is Global Alliance. “My personal opinion is that there are too high expectations on oil and gas, a sector that is still in its embryonic stage and surrounded by huge uncertainties. This should not be the case; we have to carry on with our businesses, as if everything goes well, we all have see a big bonus,” said Managing Director Celso Raposo. Global Alliance has a 31% share of the $278 million insurance market, including a 34% share in short-term insurance and a 13% share in life insurance. The firm sees opportunities in life insurance, which has a penetration level of just 1%, but also in areas such as agriculture, where Raposo believes “there is opportunity in insuring crops.”

Another firm eyeing agricultural insurance is Diamond, a newcomer to the market established in 2014. Speaking to CEO Ana F. Gunde, TBY asked whether smaller, local firms would have the capacity to also insure the larger energy projects as they come online. “We may not have proven our capacity for such large-scale projects yet, but we are confident in our capacity to continue learning and growing,” she responded, adding that, “the market needs to absorb what it can before going to the reinsurers.”

And in terms of reinsurance, there is only one resident reinsurance firm, namely Moçambique Resseguros (MOZRE). The firm has grown quickly since it began operations in 2007, experiencing its slowest year so far in 2015, up by 4%. “Insurance is always connected to economic development, so when an economy is growing, the insurance sector grows too. When an economy slows down, so does the insurance sector,” said Managing Director Mufaro Chauruka. Before the establishment of MOZRE, insurers depended on foreign-based firms in places such as South Africa, Mauritius, Kenya, Zimbabwe, and Europe. When asked about the viability of insurance and reinsurance firms covering projects including the anticipated LNG trains, Chauruka told TBY that, “these are major projects, and even when we do not have enough capacity in terms of capital, we spread the risks.” He suggests a pooling of capacity amongst insurers and reinsurers, “where companies come together to build capacity in terms of capital base.” This would serve to not only spread the wealth among every firm in the sector, but also ensure contracts are signed domestically, thus helping to line government coffers as it collects tax. MOZRE itself remains more protected than its domestic insurance cousins, with 45% of its business coming from outside the country. Chauruka expects growth this year to come in at between 15 and 20%, compared to insurance firm growth, which he predicts will be around 5% or less.

Overall, insurance penetration in Mozambique stands at 1.52%, according to regulator figures, which is far below the African average of approximately 4%, according to a KPMG report, and way below the leading country in Africa in terms of penetration, South Africa, which can boast of over 15%. Isaias Diogo Chembeze, Executive Board Member of EMOSE, a former state-owned insurer, the oldest insurer in the market and 2nd second largest in terms of market share, told TBY that, “We have to improve on [the penetration rate], and I think that economic progress in the country will also benefit the insurance market. Opportunities will emerge as a result, not only in terms of new business, but also in terms of businesses that are already in place. As the economy grows, people will increasingly understand that they need to move their safety to the next level. Insurance will become a need and a standard in people’s lives.”

Another issue facing the sector is enforcement. There exist only two types of mandatory policy in Mozambique, namely third-party motor insurance and workers’ accident insurance. Yet, a lot of motorists flout the rules, which undermines the legal framework, which was described to TBY as “among the most advanced on the continent” by the CEO of Indico Seguros Ruben Chivale, who also spoke about challenges in finding the right employees. “We also need to establish an institute of insurance like they have in South Africa or Zimbabwe. This will help in terms of developing skills among the workforce” he concluded.

It is likely we will see sector collaboration when it comes to pooling resources to cover the large energy projects coming online in the future. Elsewhere, a growing economy should result in higher revenues for those willing to plod along and carve out a market share while waiting for the big tickets to come along.