TanzaniaInvest had the pleasure of interviewing Mr. Rajab S. Kakusa, CEO of TAN-RE, the only reinsurance company licensed in Tanzania.
TAN-RE provides a broad range of reinsurance products and services to clients in Africa and selected parts of Middle East and Asia.
Mr. Kakusa discusses the company’s expansion strategy, the Tanzanian insurance sector’s outlook, and the opportunities available.
TanzaniaInvest: The Tanzania insurance market is crowded with 32 insurance companies but only one reinsurance company, TAN-RE.Is this ratio adequate for the market to grow?
Rajab Kakusa: TAN-RE was established in 2001, by the Government of Tanzania, to transact reinsurance business in respect of both, short-term and long-term reinsurance business, locally as well as across the region.
The Government of Tanzania saw the need to protect the growth of the insurance industry in the country, with the aim of curbing insurance premiums flight out of the national boundaries, and extended mandatory cessions to TAN-RE.
This has contributed greatly to our course and increased our competitiveness with giant reinsurance companies in the region.
Protecting national reinsurers for a certain period of time, is a norm practiced in other countries as well, like Kenya (Kenya Re), Ghana (Ghana Re), Senegal (Sen Re) Algeria (CCR Algeria), Tunisia (Tunis Re), Namibia (Namib Re), Uganda (Uganda Re) and Ethiopia (Ethiopia Re, the newly established company) just to mention a few.
With adequate capacities to support the market growth, the Mandatory Treaties shares ceded to TAN-RE will remain at twenty percent (20%) indefinitely, and Policy Cessions are at ten percent (10%) to cease in year 2025.
Therefore additional capacity for full placement of reinsurance business is sought from other reinsurance companies not domiciled in Tanzania.
There are a few specialized classes of insurance that TAN-RE is not providing yet, like cover to protect against cybercrimes, underground mining, just to mention a few, hence for these specialized types of risks companies continue to obtain coverage from other reinsurers outside this market.
As we continue to grow, we strive to expand our portfolio to also cover emerging classes of business in support of insurance industry growth and its contribution to the economy of our country.
TI: In 2015, TAN-RE was trading with 222 (208 in year 2014) companies in 48 markets in Africa, Middle Eaast and South East Asia. How relevant is the Tanzanian markets to your overall operations?
RK: The Tanzanian market is the largest market in our portfolio (being over 80% of our portfolio) when compared to the business written from the international market.
TAN-RE values the growth of the local market given potential for growth and its direct contribution to the well-being of our people and economic growth at large.
Our local insurance penetration rates are still low, and the insurance fraternity under the leadership of TIRA strives to increase the penetration rate.
The local context in other African countries mandates that local capacity must be exhausted before insurance business can be externalized to foreign reinsurers; this limits the volume of insurance business transaction from international markets, where also certain classes of business like life, motor and marine classes of business in some cases, are localized.
Recognizing this niche market in our business portfolio, and responding to the needs of our local market, TAN-RE is working with partners and regulatory authorities in promoting micro insurance as a key strategy to rapidly increase insurance penetration rates in Tanzania, particularly by capacity building through provision on trainings in close collaboration with lead global experts in insurance and reinsurance.
TI: In your 2015 report you indicate that diversification of TAN-RE portfolio remains critical and paramount to its business strategy. How competitive are you in the African market?
RK:Our vision is ‘to be among the best Reinsurers in Africa’, and our current 2015-2019 Strategic Plan provides a road map with details.
Briefly, we are pursuing the diversification of our portfolio, at two main levels: first by introducing new products into our portfolio, and second by expanding our footprint across the region.
We now have the facility to write political violence and terrorism business, oil and energy business, and are working on introducing new products to cater for micro insurance business and takaful (Islamic compliant) business.
In addition, we have recently established our presence in the Southern region of Africa, through Ezulwini Re. This extends our reach in the SADC region, and strengthens our competitiveness in Africa.
TI: The Tanzanian insurance industry total premiums reached TZS618.9b in 2015, increasing by 12% from 2014 and by 30% from 2013. What is your preliminary feedback for 2016?
RK: Our 2016 financial report will be released by the end of Q1 2017. I would suggest we wait for this official announcement of our performance for 2016.
What I can tell you for now is that, based on the trends from the past few years, we can confidently project continued growth of our premiums by end 2016.
Equally important to mention is the fact that our focus goes beyond premium growth, to emphasize not just quantity of business that we do but also the quality of our business operations.
We have successfully maintained our credit rating of A+ (local currency claims paying ability) and B+ (international currency claims paying ability) rated by GCR of South Africa, and in 2016 were awarded with Quality Management Systems Certification on new Standard ISO 9001:2015.
The award of ISO 9001:2015 QMS Certification to TAN-RE demonstrates compliance and commitment to industry-respected practices and sustained client satisfaction as well as better determination and planning for risks arising as a result of external and internal issues relevant to TAN-RE’s purpose and strategic direction.
TI: What has been the effect of the introduction of 18% VAT on insurance products?
RK: I think it is too early to comment. However, VAT is applicable on all services and/or transactions thus not unique for insurance services. This is one way that growth of insurance directly supports our economy.
I commend the steps taken by the Government and I urge the insurance community to educate our beneficiaries on importance of paying appropriate taxes.
I believe going forward there is always room for improvement including on the applicable VAT rates etc.
TI: The insurance penetration (premiums as a percentage of GDP) remained at 0.7% in 2015 as recorded in 2014. How do you see the future outlook for the insurance market?
RK: The future is very promising for increased penetration rates for insurance in Tanzania.
This requires deliberate efforts and innovations in expanding and scaling up micro insurance.
At the moment TAN-RE is working closely with the Association of Tanzania Insurers (ATI), the Tanzania Insurance Brokers Association (TIBA) and the Insurance Institute of Tanzania (IIT) to increase public awareness on the importance of insurance.
We have a remarkable opportunity to do this now than before, given the population growth and the overall efforts by our Government on taking Tanzania to a middle-income level economy by 2025.
TI: Which segments hold the greatest potential for growth?
RK: In ensuring that every individual in Tanzania attains basic insurance coverage, life as well as non-life, and that insurance supports core economic activities and business growth – especially small entrepreneurs, we must not forget that 80% of our population is made of farmers, small holder farmers for the vast majority.
So the question is, how do we reach them more efficiently and provide appropriate micro insurance products, in particular, agriculture insurance products for farmers.
There is potential growth on microinsurance through increasing use of information technology, especially mobile phones, and the expansion of mobile banking services, including in rural areas, provides us with unique opportunities to transform insurance industry, and rapidly increase insurance penetration rates across the country.
This is in line with TAN-RE mission that is to provide sustainable reinsurance capacity and security in the best interest of our customers, shareholders and other stakeholders.