Insurance enviroment spawns newscomer, Centriq Insurance

23 October 2006 Michael Blain

Centriq Insurance, South Africas first black empowered insurance group specialising in risk finance, cell captives, underwriting management and affinity business was launched in Johannesburg earlier this year. 

CEO, Michael Blain says:  Factors driving mergers amongst insurers include globalisation, the need for economies of scale, skills shortages and increasing regulatory and compliance costs.  In the South African market BEE is a further imperative promoting mergers and acquisitions.

In 2004 Santam saw an opportunity to acquire Nova Group (comprising Nova Risk Partners specialised short term insurer and Nova Life Partners specialised life insurer) and to integrate the company with its own specialised insurer Santam Risk Finance Limited.  By merging the businesses, a new insurance group was created with critical mass, a blue chip client base, and greater depth of skills.

Kagiso Treasury Services acquired a 33% shareholding in the new group enabling Centriqs BEE credentials to exceed the Financial Sector Charters ownership targets of 25% BEE ownership by 2010, and facilitating considerable progress in meeting targets in terms of Black board representation, employment equity and procurement.

CEO, Michael Blain, says Centriqs offering talks to the increased demand for security, sustainability and robustness of solutions in light of international accounting standards requirements and evolving tax and regulatory scrutiny of finite risk products. 

Blain predicts that Centriq will benefit from the strong growth opportunities in its sector.  A recent surveys findings show that two-thirds (67%) of companies report overall levels of risk have increased over the last 2-3 years, and a similar proportion (66%) plan to increase expenditure over the next three years.  A further 42% report that gaps still exist in their coverage of key risks. (source:  Ernst & Young Risk Survey, 16-03-2006)

He explains:  "Risk management has emerged as a fundamental discipline and continues to grow in prominence as responsible companies of all sizes respond to risks in a more formalised and structured manner than in the past.  In addition, companies appear to be reconsidering the costs and efficiencies of managing offshore captives in favour of local risk financing vehicles."

Blain anticipates that Centriqs gross written premiums will be in the order of R1.5 bn for 2006.

Blain says:  "Local insurers are facing an unprecedented image crisis, a volatile marketplace where traditional pricing and distribution channels are threatened, a dynamic and increasingly onerous regulatory and legislative environment, and a growing range of insurance options resulting from an enlarged international presence and emergence of competition from broad-based financial services providers."

"In this context, local suppliers are pressured to innovate to compete with offshore options by remaining abreast of best practice and delivering relevant, value-adding service to clients.  Domestic risk mangers are increasingly demanding security and service quality from preferred product providers where trusted relationships matter more than lowest price.  At the same time, increasingly onerous statutory requirements and regulations will inevitably mean increased reliance on the expertise afforded by leading solutions providers," comments Blain.

Blain concludes:  "As the insurance environment evolves in response to global trends, societal changes, government policy and economic trends, so innovative insurance models are emerging.   Key to success are flexibility, lack of legacy constraints, a broad skills base, shareholder strength and credible empowerment credentials."

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