Seamless risk protection for mega-projects: Ghana

Karl Bishop, Santam head Niche Business.

Infrastructure development is booming across Africa, due in no small part to significant economic growth and foreign direct investment. In line with this, and as part of Santam’s strategic expansion into Africa in partnership with Sanlam Emerging Markets, Santam Specialist Business has launched a Seamless insurance solution which offers comprehensive risk protection for mega-projects across Africa. In this series of articles, we speak to Karl Bishop, head: Niche Business at Santam, and explore the opportunities in individual African countries for infrastructure development and the specialist insurance business. This month, the spotlight falls on Ghana.

Infrastructure for a growing economy

Ghana’s immense untapped natural resources, as well as the skilled and well-educated Ghanaian work-force, are indicative of the great potential for economic development in the country and the region. The discovery of offshore oil reserves in 2007 placed Ghana on an unprecedented economic growth trajectory which saw GDP growth figures peaking at 15% in 2011 before regressing to just above 4% in 2014 in the aftermath of global commodity price squeeze. Recovery is expected to bring the GDP growth figure up to 6% by 2016.

When contrasting this with South Africa's low GDP growth prospects at under 3%, Ghana's economic value proposition for South African business is obvious. In fact, Ghana has become a destination of choice for South African investors seeking access to West African markets. Bilateral trade between Ghana and South Africa has ballooned from R2.6 billion in 2010 to a massive R10.8 billion in 2014 – a significant portion of which is the export of South African goods and services into Ghana. ‘Brand SA’ is steadily displacing European supplies and services into the Ghanaian market.

“Despite Ghana's recently discovered oil fortunes, much of the population still remains poor and rural, however, with little or no access to public utilities and facilities of any kind. World Bank research estimates the country’s annual infrastructure development funding gap to be greater than USD1.2 billion over the next decade,” says Karl.
He says the Ghanaian government has embarked on a concerted drive to attract foreign direct investment (FDI) to address the huge infrastructure development gap. “In 2013 alone, FDI totalled USD3.9 billion. Ghana is the only Sub-Saharan country other than South Africa to have issued an over-subscribed USD1.0 billion Eurobond, much of which will be directed at infrastructure development.”

In 2013, around 400 projects with foreign participation were registered in Ghana. Of these, 300 were fully foreign-owned and 100 were joint ventures with locals. Notable Ghanaian infrastructure projects include:

• Expansion and dualisation of Accra – Takoradi highway (185km), a crucial link to the oil-rich west
• Rehabilitation and expansion of the Takoradi port
• The Korle-Bu teaching hospital diagnostic centre – the third largest African hospital with a 2 000 bed capacity and 1 400 out-patient facility
• The Accra – Tema motorway project
• Construction and expansion of various airports across Ghana
• The Sankofa and Gaye Nyame oil field development 60km offshore of Ghana’s western region
• Construction of 200 000 units of low-cost housing
• Construction of 275 telecom base stations for Tigo cellular.

Opportunities for specialist insurance

Ghana’s largely traditional methods of distribution of insurance products, as well as widespread poverty, have confined insurance clients to corporates, and middle and upper-middle income segments in urban areas. In the corporate space, specialist business classes are growing as the Ghanaian economy evolves, underpinned by new projects and investments.

“Timeous availability of reliable, comprehensive insurance market statistics in most African countries is rare, and even more so in the case of specialist classes, largely since most insurance is placed by offshore brokers into overseas markets,” says Karl.

He says Santam has a presence in Ghana through a Sanlam Emerging Markets investment in the Enterprise Group. The Enterprise Insurance Company Ghana is a leading player in the market, offering limited capacity in almost all specialist lines.

Why insure with Santam Specialist Business?

Karl says mega-infrastructure projects, such as dams, transport infrastructure, and renewable energy projects and plants have massive price tags with equally large insurable risks. “They require innovation, a high level of underwriting expertise and the special technical knowledge of a large insurer to effectively mitigate risk.

“Santam Specialist Business provides all these and more. We constitute teams of underwriting managers who are all experts in their respective fields, with a keen focus on entrepreneurial and big-thinking ideas. We are able to identify opportunities or threats to clients and, in turn, offer tailor-made solutions in order to mitigate those risks.”

The expertise offered by Santam Specialist Business which is most suited to the Ghanaian market includes:

• Engineering all risk, construction all risk, project liability insurance – targeting both large infrastructure and smaller, sector-specific commercial construction projects
• Specialised commercial property insurance
• Marine cargo and transit insurance targeting the movement of goods in and out of the port areas
• Project guarantees for advance payments received by contractors and project performance guarantees
• Travel insurance targeting commercial clients
• Aviation insurance targeting helicopters and light commercial aircraft.

Opportunities for Seamless Specialist Insurance in Ghana

Karl believes convenience and appropriate risk identification are vital when placing cover for complex mega-projects. “However, projects of this size are extremely complex – cover may be required for public liability, professional indemnity, marine insurance, contract works, project delays, assets, travel insurance and riot cover, for example. The basis of our Seamless insurance solution is that it covers all bases of insurance via a single touch-point – the client, whether the insured or an intermediary, does not have to deal with a number of different insurance parties and risk gaps in cover.”

Policies are issued and administered by MIRABILIS Engineering Underwriting Managers, which covers all aspects of a project by distributing comprehensive cover and manages the entire process from policy issuing to claims handling and processing.

“We are marketing our Seamless solution through corporate and commercial broker firms, since clients in the specialist business sector expect to work with intermediaries and insurers that understand their needs and offer bespoke risk management solutions that are appropriate at different stages of their business journey.

“With the increased activity in development and infrastructure projects, Santam’s Seamless insurance solution – the first of its kind in Africa – is perfectly suited to the Ghanaian market. The product caters for both medium and large projects and provides clients and brokers with a single policy and single point of contact throughout the project life cycle,” concludes Karl.