Playing by the rules in Africa is key to managing risk

Playing by the rules to meet the insurance challenges their clients face in Africa has been responsible for Alexander Forbes’ success on the continent.

"Despite an increase in restrictions in most African insurance markets, companies that are good corporate citizens and comply with local regulations are succeeding in Africa", says Michael Duncan, Executive Leader Global Practice at Alexander Forbes Risk Services .

As in South Africa every African country that Alexander Forbes operates in has insurance regulations seeking to prevent the export of premiums - the intention being to protect the local insurance industry and create jobs.

This provides a unique set of challenges for many organisations which seek to extend their global or regional insurance programmes to their African operations.

For example, “In the past it was common practice for a South African parent company to insure the risks of its African operations in the South African market. This, however, is now illegal in most African countries.“

Regulators want risks to be offered (and written) in their local markets and are not sympathetic to the fact that global programmes generally provide wider cover at lower cost.

This means that all African risk, except that which cannot be underwritten locally, has to be placed in local African insurance markets.

"While not being allowed to place risk in the more sophisticated South African and International markets is an added cost in running businesses in Africa, knowing how to do this legally and effectively is the key to acceptance and success in these markets", says Duncan.

For example, “Since most African insurance markets are quite small, an organisation could damage its reputation with officials and local businesses in a country if it were discovered that it insured its risks illegally outside that country”, warns Duncan.

While restrictions like this may appear problematic, if companies obtain the correct advice from their insurance brokers on how best to dovetail local African insurance requirements with their global or regional insurance programmes, the additional costs can be minimised - and important reputation and trust dividends earned.