The reinsurance business in Zambia is a bespoke investment opportunity that less than 10 Zambian firms have taken on in the pursuit of creating value. The reason for this minimal participation is due to several factors, however, hope has been here for a while through ZEP-RE whose COMESA mandate is to foster the development of the region’s insurance and reinsurance industry.
According to their website, ZEP-RE, which is a PTA Reinsurance Company, was created under the auspices of the then Preferential Trade Area (the precursor to COMESA). From inception, the company’s agenda was simple: “To promote the trade in insurance and reinsurance trade through creation of capacity, training of the region’s insurance personnel, provision of technical services and the re-investment of premium funds within the region.”
With Sub-Saharan growth now projected to rise to a modest 2.6% in 2019 from 2.5% in 2018, capital investments have become one of the biggest growth areas in the region as financial institutions and investors pour their millions of dollars hoping for a decent return.
As a result, investment in the reinsurance businesses has become a “gold mine” opportunity as the need to reduce of the cost of borrowing through offering insurance opportunities that can enable investors sleep at night becomes paramount. The reinsurance opportunity is the practice whereby insurers transfer portions of their risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim. This has the inevitable effect of reducing risk and to an extent offers comfort to lenders.
Established in November 1990 in Mbabane-Swaziland and with headquarters in Nairobi-Kenya, ZEP-RE has the following signatory states on its membership roster: Angola, Burundi, Comoros, Djibouti, Kenya, Lesotho, Malawi, Mozambique, Rwanda, Somali, Sudan, Tanzania, Uganda, Zambia, Zimbabwe., D.R. Congo, Eritrea, Ethiopia, Madagascar and Mauritius.
Interestingly enough, Zambia was actually one of the original signatory states who agreed to the following ambitious functions of the company:
- Transacting reinsurance business within and outside the Region.
- Creating and administering pools for the interest of the Region’s insurance markets.
- Training insurance and reinsurance industry personnel in the Region.
- Providing technical assistance to the insurance industry of the Region.
- Investing premiums in the Region to promote economic development.
- Promoting contacts and business co-operation in the Region.
ZEP-RE’s approach can be likened to the share value methodology that most multinationals have been adopting according to their annual reports. This is because not only does the company pursue value creation strategies for itself to ensure sustainability of their mandate, they also give back in a CSR type way that ensures that there is capacity building in the industry that can enable more players participate in their business arena. However, the way ZEP RE does it creates sustainable partnerships by building capacity of would be competitors: rather collaborators as they seek to grow the insurance industry.
Championing financial inclusion through insurance has also been another way they give back. Examples of this includes using support from cooperating partners to enabled the launch and expansion of small enterprises, spurring economic growth by creating employment and encouraging a savings culture across eastern Africa. They have also provided weather-based index insurance that has significantly reduced the vulnerability of farmers in the wake of drought. In Zambia, the reinsurer supports weather-based crop insurance directly impacting more than one million farmers under the auspices of the Farmer Input Support Program (FISP), according to their website.