Paradigm shift: New regulations and norms look set to spur long-term changes

Significant changes have taken place in the insurance sector in Gabon, expanding opportunities for investment. Addressing the issue of unpaid premiums, the regional regulator has adopted a new norm with regard to the relation between clients, brokers and insurance companies. It has also adopted a new regulation aimed at encouraging investments in microinsurance. Moreover, a national reinsurance company has been established with an aim to maintaining a higher portion of premiums in the country.

KEY PLAYERS: Eight insurance companies are competing in Gabon, three of which specialise in life insurance (UAG Vie, NSIA Vie and Ogar Vie) and five in property and casualty insurance (Axa, Ogar, NSIA, Colina and Assinco). Except for Ogar and Assinco, all of these companies are subsidiaries of foreign insurance firms: Axa is a subsidiary of France’s Axa, NSIA is a subsidiary of the pan-African group of the same name, Colina is a subsidiary of Morocco’s Saham and UAG Vie is a subsidiary of the African SUNU. The oldest company within the country is Axa, which has been operating since 1976. The youngest firm meanwhile is Colina, with activities that began in 2006. Gabon’s insurance companies employed a total of 457 people in 2011, up from 408 people in 2009.

In 2011 the Ogar Group is maintaining its position as the country’s largest insurer, with a consolidated turnover of CFA35bn (€52.5m), progressing by 10.68%. Having a 38% share of the whole market (down from a 41% market share in 2009), the Ogar Group has a dominant position in the life insurance sector (52%) and in the property and casualty sector (36%). The value of life premiums in 2011 was CFA7.9bn (€11.9m), growing by 15% compared to 2010. The value of Ogar’s non-life premiums in 2011 was CFA27bn (€40.5m), growing by 9.5%, while average sector growth of property and casualty premiums was 5.44%. The Ogar Group saw 2011 net profits of CFA1.5bn (€2.25m).

The second company in terms of market share is NSIA. It had a turnover of CFA17.84bn (€26.76m) in 2011, increasing its performance by 3.44% compared to 2010. NSIA’s share of the insurance market is 19.82%. Property and casualty insurance represents 88% of its turnover but its growth was entirely made in the life insurance sector, with expansion of about 55%.

NSIA is followed by Colina, the newest company on the market. In 2011 Colina saw a turnover of CFA11.76bn (€17.64m), growing by 17.64%. The firm, whose activities are concentrated on property and casualty insurance, has a 15.75% share of this segment.

Axa and Assinco both had turnover of about CFA10bn (€15m), growing by 6.96% for Axa and declining by 6.89% for Assinco. Both Axa and Assinco have a 13% share of the property and casualty segment. As for UAG Vie, with CFA5.22bn (€7.83m) in turnover, it recorded the biggest growth among all insurers, up by 27.26% compared to the previous year. It has a 5.81% share of the overall insurance market.

PERFORMANCE: The penetration rate in Gabon is low, and the insurance market accounted for only 1.3% of GDP in 2010. It is slightly higher than the regional average of 1% in the Inter-African Conference of Insurance Markets (Conférence Intérafricaine des Marchés des Assurances, CIMA). As Gabon has one of the highest levels of GDP per capita in sub-Saharan Africa, this low level of penetration may in part be explained by a general lack of knowledge about insurance as well as by a negative perception of insurers by those with little experience of them.

In coordination with the Federation of Insurance Companies of Gabon (Fédération Gabonaise des Sociétés d’Assurance, FEGASA), insurers are carrying out marketing campaigns to inform people about insurance. “We are working in collaboration with the FEGASA in a constant publicity campaign to explain insurance, which remains widely misunderstood,” Bernard Bartoszek, the managing director of Ogar, told OBG. That said, insurance products are not accessible to all, as the average premium cost in Gabon is CFA55,583 (€83.37), a great deal more than the CFA5104 (€7.66) fee that was being charged by insurers in the other 13 member states of CIMA during a survey conducted in 2010.

In 2011, the market general turnover amounted to CFA89.99bn (€134.99m), up by 8.12% from 2010. Non-life insurance was CFA74.67bn (€112.01m), growing by 5.44%. Being one of the only compulsory lines in Gabon, car insurance is the biggest segment of the market, accounting for 25.52% of general turnover and for 30.75% of non-life turnover. The segment registered growth of about 7.45% compared to figures from 2010. The leading company in the car insurance segment is NSIA, with premiums valued at CFA4.47bn (€6.71m). Ogar nevertheless registered the highest growth rate for the segment, moving to the second position with a 37.5% uptick in its sales.

Although obligatory, it is estimated 40% of drivers are nevertheless still do not have car insurance. Considering the high number of car incidents involving uninsured drivers, the government announced in 2009 the creation of a national guarantee fund, to be financed through a special tax on premiums and aimed at protecting victims of car accidents in the event the party causing the accident is not insured. However, so far this project has not been realised.

With a total premium volume of CFA18.83bn (€28.25m) in 2011, transport insurance is the second-largest segment by turnover, growing by 8.54% from 2010. It represented 20.93% of the total insurance turnover and 25.22% of the non-life segment. The leader in transport insurance is Ogar, with a 68% market share. The fastest-growing company in the segment was Colina, whose turnover grew by 148%, allowing it to move from the last to the second position and to acquire a 13.47% share of this market, compared to 5.88% a year before.

Health insurance amounted to CFA13.18bn (€19.77m), growing by 3.75% from 2010. It represented 14.64% of total insurance turnover and 17.65% of non-life. The leading company for the segment is Ogar, with a 28% market share, down from 32% in 2010. Colina had the highest growth rate, a 57% increase, and acquired the number two position with a 27% share.

As for fire insurance, it amounted to CFA10.32bn (€15.48m) in 2011. The fire segment was the only one to decrease, seeing a fall of 10.06% compared to the previous year. It represented 11.46% of the total insurance turnover and 13.81% of non-life. The leading company is again Ogar, with a 36% market share. All companies in the segment slightly increased their turnover, except for Axa and Colina.

Life cover amounted to CFA15.3bn (€22.95m) in 2011, increasing by 23.45% and representing the fastest-growing segment. Although Ogar Vie’s turnover in that segment grew by 15% compared to 2010, its market share slipped from 56% to 52%. With 55% growth, NSIA acquired a 13.8% market share. With 27.26% growth, UAG Vie moved up to a share of 34%.

As for claims payment, in 2010 (most recent data) insurance companies paid a total of CFA19.43bn (€29.15m) for non-life claims, down 37.4% from 2009.

CAPITAL INVESTMENT: The latest available figures indicate that in 2010, insurance companies in Gabon invested a total amount of CFA95bn (€142.5m), up by 3.8% compared to the previous year and by 6.9% compared to 2005. Some 45% of the amount invested went to liquid investments, 23% to bonds, 15% to real estate, 9% to stocks, 1% to loans and 7% to other investments. About 59% of all investments were made by life insurers and 31% by non-life insurers.

In 2010, the total net income of life insurance companies in Gabon amounted to CFA1.62bn (€2.43m), up by 11.8% compared to the previous year and by 34.5% when compared to 2005.

As for non-life insurers, their total net income amounted to CFA1.75bn (€2.63m), down by 14.4% compared to the previous year and dropping by 11.5% when compared to 2005 figures.

BROKERAGE MARKETS: There are 19 insurance brokers licensed in Gabon. Historically, brokers have played an essential role in the insurance sector, generating around 70% of sales. The situation varies from one insurer to another, as Colina reports relying on brokers for around 90% of sales, whereas the firm UAG Vie functions with few intermediaries. Among the brokers, the top three have a majority of the market share. As the market is driven by car insurance, brokers are currently highly dependent on the growth of the automotive market. Considering the high level of still uninsured drivers and the increasing use of vehicles, prospects are positive for brokers. However CIMA’s new regulation, called Article 13, may have an unexpected negative impact on the growth of the car insurance segment. “Article 13 has put an end to fractioning premiums, which can easily reach CFA1m (€1500). This makes car insurance more of a luxury and will probably result in higher uninsured rates of motor vehicles,” Christophe Roudaut, the CEO of Gras Savoye, one of the main brokers in Gabon, told OBG.

This risk is mitigated somewhat as the government remains the top buyer of cars in Gabon, while individuals represent a minor proportion of the turnover compared to the state or the private sector. To avoid dependency on one product line and adjust to the new regulation, some brokers are considering focusing on other segments, including health insurance, as well as diversifying their client base by targeting small and medium-sized enterprises (SMEs) and individuals.

REGULATION: Gabon’s insurance market has been governed by the CIMA code since 1995. At the national level, the market is supervised by the National Insurance Directorate (Direction Nationale de l’Assurance, DNA). The reforms introduced by CIMA in April 2011 essentially compel customers to pay their premiums in one instalment in order to be considered covered.

It also deprives brokers of the ability to cash-in payments (except for payments below CFA1bn, or €1.5m), which was the usual practice. For now on, customers must make their payments directly to their insurers, which in return will then transfer required commissions to the brokers. The cycle of money circulation has thus been reversed from the previous system.

This reform stemmed from a major problem with arrears on premiums. According to Eugénie Ndende, the CEO of Assinco, arrears amounted to 32% of premiums for the market as a whole. This situation had a negative impact for customers and insurers as it considerably delayed payments in cases of claims.

In 2011, CIMA granted insurers three years to recover all arrears and to remove irrecoverable payments from their books. The new regulation also forces insurers to handle all payments resulting from claims within a three-month deadline.

More recently, in July 2012 CIMA conducted several audits to evaluate the implementation of the reform. The results of the audit are still to be announced, but their mere presence has forced the sector to take the new regulations a bit more seriously than it might have otherwise.

From now on, the challenge for insurers will be to ensure payments are made within the new shorter time frame, which could prove to be difficult in the event of numerous simultaneous claims.

As for brokers, Nicaise Jahmal Kandjani, the Libreville branch manager for ACR, told OBG, “Collecting premiums is not such an easy task as it may appear. It requires certain managerial skills that brokers had long developed. After CIMA’s audit, insurance companies may be more open to returning to negotiations.”

REINSURANCE: Following the example of other African countries, in December 2011 Gabon created a national reinsurer, named the Société Commerciale Gabonaise de Reassurance (SCG-Re). The SCG-Re is 67.5% held by the government and 32.5% by local insurers, with total capital of CFA2bn (€3m). Gabon’s insurers now have a legal obligation to cede 15% of their non-life and 10% their life contracts to the SCGRe to help fund the organisation.

In 2010, insurance companies in Gabon reinsured CFA816m (€1.22m) of their life premiums with international reinsurers, down by 9.6% compared to the previous year but growing by 11.7% compared to 2005. This represented 6.6% of all life premiums written in 2010. Insurance companies also reinsured CFA31.19bn (€46.79m) of their non-life premiums with international reinsurers, up by 10.7% compared to 2010 and growing by 59% since 2009. This represented 44.3% of all non-life premiums in 2010.

SCG-Re’s main objective is to keep a substantial part of the capital transferred by local insurers to international reinsurers in Gabon instead. To do so, the SCG-Re is empowered to manage all premiums conceded by law from local insurers, to act directly as a reinsurer and/or to assist in the creation of local insurance and reinsurance companies. It is also mandated to provide its assistance whenever possible on reinsurance strategies. However, as the SCG-Re is not yet empowered to provide reinsurance services for high-level risks, such as aviation, health care and offshore oil, the exports of premiums and fronting are likely to continue in those segments. “Gabon’s insurance market has a lot of fronting. With industrial projects, such as those which are part of Gabon Industrial, there is a need for a lot of capital to insure at a high value level,” Ndende told OBG.

The board of directors of the SCG-Re is comprised of representatives of the (former) Ministry of Economy, Commerce, Industry and Tourism. As for local insurers, they are represented by Axa, Ogar and NSIA.

MICROINSURANCE: In April 2012, CIMA also introduced a new regulation aimed at promoting microinsurance. The objective is to create incentives for investors in that segment and to promote the culture of insurance among low-income populations by offering affordable coverage for daily risks. “Microinsurance is a step forward in bringing people toward classic insurance services” Jean-Claude Ngbwa, CIMA’s secretary-general, told OBG.

The microinsurance market is generally characterised by inexpensive premiums, reduced coverage, simplified products, basic contracts and easy claim processes. CIMA’s regulation opens the door to microinsurance services for life (death, savings and financing), non-life (health, physical injury and loss of goods) and agricultural risks (loss of harvest, loss of cattle and fishery risks). For life services, CIMA’s regulation specifies that savings must be transferred within 10 days of death. For other services, microinsurers must answer all claims within seven days and process all the accepted payments within 10 days.

According to the International Labour Organisation, microinsurance services are progressing quickly in Africa, with 25m people benefitting from it in 2011, compared to only 4.5m in 2006. CIMA’s new regulation offers an appropriate framework for investors in Gabon. Existing insurance companies may obtain a licence from CIMA to offer mircoinsurance services. As for new operators, the capital requirement is fixed at CFA500m (€750,000). Meanwhile, existing brokers are de facto authorised to act as intermediaries in the microinsurance sector. “The informal economy is a major obstacle,” Bartoszek told OBG. “As more of the economy is formalised, this will benefit the development of many sectors, particularly insurance.”

OUTLOOK: The recent insurance reforms at the CIMA level have had a positive effect in Gabon. The reforms significantly reduced arrears, which allows all stakeholders to better appreciate the real size and strength of their markets; they have considerably accelerated the payment of claims, which contributes in building a positive image of insurers among the public; and they have critically strengthened the solvency of insurance companies, which will allow them to offer better services to individuals and to the private sector. As for the creation of the SCG-Re, it is aligning Gabon with regional reinsurance best practices. Assuming education helps spread trust of insurance to a wider base, future growth now seems a distinct possibility.

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The Report: Gabon 2012

Insurance chapter from The Report: Gabon 2012

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