Interview: Roger Eugène Boa Johnson
How can the authorities ensure the sustainable development of the insurance sector?
ROGER EUGÈNE BOA JOHNSON: After the application of Article 13 – which was responsible for implementing a “pay-before-cover” policy in 2011 – the treasury of insurance companies in Côte d’Ivoire has substantially improved. Indeed, this has brought much-needed structure and stability to the sector. As a result, Côte d’Ivoire’s CFA304bn (€456m) insurance market is the largest market of its kind within the Inter-African Conference of Insurance Markets (Conférence Inter-Africaine des Marchés d’Assurances, CIMA) region, with 34 insurers and five new additions.
It is in this context that we are now witnessing a price war which is impacting the financial stability of some establishments. For example, in 2017 the regulator withdrew one company’s accreditations and has put another under provisional administration. In response, the regulator is seeking to strengthen the entire industry by increasing the minimum social capital requirements from the current CFA1bn (€1.5m) to an intermediary phase of CFA3bn (€4.5m) in 2019 and reaching CFA5bn (€7.5m) in 2021. We believe this change to Article 329 will result in an inevitable consolidation of the market, resulting in some smaller companies not having the capacity to cope with the increase. Groups with several branches could either sell or close any extra offices they are unable to recapitalise.
In what ways do you expect Article 308 and Article 329 to impact the sector?
BOA JOHNSON: Articles 308 and 329 were both conceived with the same underlying objective: to maintain a larger share of premiums within the region. By increasing the capital buffers of insurers, the regulator will increase the ability of local operators to cover basic risks – such as auto, life or health insurance – while Article 308 will mandate that at least 50% of premiums of the largest segments remain within the region. The idea that this would encourage a larger share of the profits to remain within member states is a well-founded one, and we hope to see the return of international reinsurers that had previously left the region.
However, an ambiguous clause included in Article 308 requires all reinsurance offices registered within the CIMA region – but only those that have not established a local subsidiary – to provide a minimum financial guarantee of CFA1bn (€1.5m), to be adjusted on an annual basis, depending on the volume of premiums transiting through it. We recognise that this clause has discouraged some multinational actors from returning.
How much potential do micro-insurance products have in Côte d’Ivoire?
BOA JOHNSON: With a penetration rate of 1.7%, Côte d’Ivoire’s insurance sector has room for significant growth. Increasing transparency and credibility across traditional insurance segments remains our priority, although this alone will not substantially increase insurance penetration. In order to effectively target the majority of the population, micro-insurance provides the best alternative.
The regulator has taken the first step by defining what constitutes a micro-insurance product: coverage that has premiums of CFA43,000 (€64.50) or less. Under the current conditions, no insurance company can provide these products, as operating costs remain too high to cater to such clientele at such low margins. Therefore, insurers need to weave partnerships with microfinance institutions that already have dense distribution channels and field expertise. Another promising option is arising from the dynamic use of new types of payment technologies, which allow companies to engage with many more clients at a reduction in cost to insurers.
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