By Merga Yonas

African Reinsurance Corporation (Africa Re), an international financial institution, is to open its contact office in Ethiopia in a couple of weeks. Renowned for its underwriting practices and investment policy, officials from Africa Re signed an agreement with the government of Ethiopia on Thursday at the Ministry of Foreign Affairs (MoFA). So far, there was no locally established reinsurance institution in Ethiopia. The opening of the office is expected to pave the way to directly service insurance companies operating in the country with immediate effect, Bakary Kamara, managing director of Africa Re told The Reporter.

According to Kamara, the corporation undertook a feasibility study which resulted in proving that Ethiopia has the potential and a well regulated market. “The corporation has the ability to provide a better service in Ethiopia, so there is no reason to remain in Nairobi, Kenya or in some other country,” he added.

Based in Lagos, Nigeria Africa Re has six offices across the continent. The decision to establish a local reinsurance underwriting office in Addis Ababa was made during its 111th meeting held in Lagos late 2008. The aim is to foster the development of the insurance industry, promote the growth of local and regional underwriting and retention capacities, and support Ethiopia’s economic development, Shimelis Belay, assistant director of operation of Africa Re, told The Reporter.

The corporation already has a business relationship with Ethiopian Insurance Corporation and (ETC) other insurance companies in Ethiopia. For instance, it was one of the reinsures of EIC that stepped in with respect to the insurance coverage the latter gave to the Ethiopian Airlines plane that plunged into the sea off the coast of Beirut as the amount of insurance payable was beyond EIC’s means. Africa Re has a capital base that allows it to take on any specific risk and reinsure other insurance corporations with which it has a business relationship, Kamara explained.

In any economy insurance has a strong place. Forming a reinsurance institution has diverse advantages beyond using it as a risk transfer mechanism. Depending on the type of investment, investors might face risks like flood, fire or earthquake. So to mitigate the risk, they buy insurance from an insurance company to guarantee against various risks to their property. These insurance companies in turn buy reinsurance from reinsures, Eyesuswork Zafu, board chairman of the United Insurance S.C. and president of the Ethiopian Chamber of Commerce and Sectoral Association (ECCSA), told The Reporter.

In case risk servicing is beyond the capacity of the insurance company, the reinsurer will share the risk. The formation of Africa Re in Ethiopia, a credible and outstanding reinsurer in Africa, will create awareness for the local business people, a platform for exchanging information and job opportunity in the country. Through time, it will construct its own building and carry on various investments”, Eyesus Worku said.

“We need one national reinsurer in the country under the government. Though we have been repeatedly requesting the government on the formation of the corporation, so far there is nothing,” Eyesuswork said . “The establishment of company at the national level could save us from going abroad to look for a reinsurer.”

Africa Re, which was established in 1976, has shareholders from 41 member countries of the African Union, of which Ethiopia is one. Other shareholders are the African Development Bank (AfDB), the International Financial Corporation (IFC), and the German Development Finance Institution (DEG) and PROPARCO.

Its premium income has grown from USD 46 million in 1994 to more than half a billion USD in 2009 while shareholders fund grew from USD 26 million to 280 million dollars over the same period. The corporation is now ranked among the top 50 largest reinsurers worldwide on net written premium income.

Ethiopian Reporter