The African Connection Organised by Kring Internationaal Johan de Witthuis, Utrecht, 13 October 2016

Welkom Welcome Karibu Witaj Wilkommen Bienvenida Bienvenu Bem-vindo Velkommen Benvenuto Välkommen Tervetuloa Dobrodošli

Program 16.30 Doors open 16.45 Welcome and introduction of the guests by Caroline Tuin, Chairperson Kring Internationaal 17.05 Insurance in Africa, by Mark-Anthony Macharia 17.45 Africa Rising, by Andrew Slater 18.25 Q&A 18.35 Closing drinks and networking opportunity 19.30 Doors close

Welcome and introduction of the speakers Caroline Tuin

Agenda Welcome Introduction of our guests

to the 5th meeting of the Kring Internationaal Welcome to the 5th meeting of the Kring Internationaal

Introduction of our guests Mark-Anthony Macharia, FSA CERA: Mark-Anthony currently works in the Enterprise Risk Management team at NN Group. Originally from Kenya, Mark-Anthony has worked in both consulting and industry in the United Kingdom and in the Netherlands primarily focused on the calculation and reporting of Economic Capital.

Introduction of our guests Andrew Slater: Managing Director, RisCura UK MA Mathematics, Fellow of the Institute of Actuaries, CFA Charterholder Andrew is the Managing Director of RisCura’s UK operations, based in London.

Africa: insurance and pensions Andrew Slater aslater@uk.riscura.com 13 October 2016

Introduction: Andrew Slater MA Mathematics, Fellow of the Institute of Actuaries, CFA Charterholder Andrew is the Managing Director of RisCura’s UK operations, based in London. In Andrew’s 20-plus year career in investment, he has worked with pension funds, insurers and wealth management institutions around the world. During that time Andrew deliberately sought out the areas that presented a challenge to the orthodox. He started at Price Waterhouse where he qualified as an actuary. A switch to asset management followed with multi-manager SEI Investments. Immediately before joining RisCura in 2012, Andrew was with Dutch risk adviser Ortec Finance. At RisCura Andrew’s time is split between promoting RisCura’s expertise in African investment to institutional investors in Europe, and participating in RisCura’s expansion across the African continent working with local investors. Andrew has a particular focus on establishing the RisCura business in Nigeria which he visits regularly. Andrew is alumnus of Cambridge University (undergraduate MA in mathematics and postgraduate MMath in theoretical physics) and London Business School, a Fellow of the UK Institute and Faculty of Actuaries, an Affiliate of the Actuarial Society of South Africa, a Fellow of the Zambian Actuarial Society and a CFA Charterholder. Andrew was elected to Council in June 2016.

Introduction: RisCura RisCura is a global, independent investment advisory and financial analytics firm that specialises in Africa. RisCura provides investment solutions to institutions looking to prudently invest their assets to meet their investment goals and create wealth in a sustainable and targeted, risk managed way for beneficiaries. As Africa’s premier investment consultant, RisCura provides a wide range of services to the largest African investor base in listed and unlisted African investments on the continent.

Agenda Growth in Africa Pension and insurance On the ground

Quiz For employees in Nigeria, what is the compulsory minimum joint contribution rate (employee and employer) to a defined contribution pension plan, expressed as a percentage of salaries? Up to 5% 5%+ but less than 10% 10%+ but less than 15% 15%+ but less than 20% 20% or more

Agenda Growth in Africa Pension and insurance On the ground www.riscura.com/BrightAfrica

African GDP growth rates 2013 vs 2014

Continent can be divided into 9 meaningful markets   Central Africa East Africa Egypt & Sudan Francophone West Africa Maghreb region Nigeria Other West Africa South Africa Southern Africa excl. SA Source: RisCura

EDFI investment in ACP region is increasing EDFIs global distribution 2010 and 2013 Africa Caribbe-an & Pacific Meditte-ranean Countries Source: EDFI Annual Reports, RisCura analysis

DFI into Maghreb equivalent to almost 3% of its GDP African regional DFI vs. GDP Franco-phone W. Africa Source: ODI (Kingombe, Massa and te Velde) 2011, RisCura analysis

How Africa’s regions compare Sources: World Economic Outlook Oct2014 (GDP and population); Index of Economic Freedom (FDI Inflow); Trade Map (Intraregional trade); IESE Business School (Ease and Attractiveness).

Domestic consumption is fairly well diversified GDP (nominal GVA) output by region (2014) Franco-phone W. Africa Source: BMI Research, RisCura analysis

Large reliance on extractive industries for exports Breakdown of regional exports (2013) Franco-phone W. Africa Source: Trade Map, RisCura analysis

Exports concentrated on mineral products Value of exports by product (least to most diversified) (2013) Franco-phone W. Africa Source: Trade Map, RisCura analysis

High concentration of trade with Western Europe Africa’s major trade partners by exports and imports (2013) Source: Trade Map, RisCura analysis

Agenda Growth in Africa Pension and insurance On the ground

A youthful continent Median age of populations across regions Franco-phone W. Africa Africa Regions Source: CIA World Factbook, RisCura analysis

Population of sub-Saharan Africa 2050 2013 Source: World Bank, RisCura analysis

Population of the world 2050 2013 Source: World Bank, RisCura analysis

Social security in Africa: pension fund assets Source: Regulator annual reports and websites, other industry sources, EAC review of pension sector (Callund Consulting), Towers Watson Global Pension Study 2015, RisCura analysis

African pension assets growing quickly Annualised growth rates (local currency) vs. Asset as a % of GDP Source: Regulator annual reports and websites, other industry sources, EAC review of pension sector (Callund Consulting), Towers Watson Global Pension Study 2015, RisCura analysis

Significant allocation to fixed income in Nigeria and E. Africa Asset allocation of pension funds across Africa Source: Regulator annual reports and websites, other industry sources, EAC review of pension sector (Callund Consulting), Towers Watson Global Pension Study 2015, RisCura analysis

Potential for insurance growth Penetration and expected annual growth in AUM by region Franco-phone W. Africa Source: Swiss Re, UN Population Division, IMF, African Insurance Organisation, NKC Research, S&P Capital IQ, RisCura analysis

Insurance AUM in Africa Source: Swiss Re, UN Population Division, IMF, African Insurance Organisation, NKC Research, S&P Capital IQ, RisCura analysis

Significant growth in insurance AUM expected AUM by region in 2012 and 2018 (projected) Franco-phone W. Africa Source: Swiss Re, UN Population Division, IMF, African Insurance Organisation, NKC Research, S&P Capital IQ, RisCura analysis

Agenda Growth in Africa Pension and insurance On the ground

Business languages in Africa

Two major social security providers in Nigeria!

Regulation A “solvency 1” approach is the norm East African common financial legislation South Africa implementing Solvency Assessment and Management (SAM)

Non-life dominates, but life growing fast Source: African Alliance Capital Markets

Reinsurance

Industry consolidation

The challenge is culture Insurers not trusted Policy fraud Non-payment of claims Rainy-day savings for life’s adverse events Assistance from family network

Risk based supervision a long way off

Francophone Africa Source: Renata De Leers, CEO ACB Consulting TOGO

Francophone Africa Renata De Leers, CEO ACB Consulting TOGO

The informal sector Micro insurance Micro pensions Technology Leapfrogging Informal sector financial inclusion New “micro” legislation “Reverse” innovation?

Demography

Mortality Source : United Nations, Department of Economic and Social Affairs, Population Division (2011) World Population Prospects: The 2010 Revision

Annuities

Africa's 'new oil' is going to be the wealth of its soil High-five for Africa African Development Bank President Akinwumi Adesina Africa's 'new oil' is going to be the wealth of its soil

Thank you riscura.com/BrightAfrica

Q&A and discussion

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Insurance in Africa Insurance in Africa

Agenda Africa Some Statistics Current Situation The Four Different Regions Microinsurance The Future in Conclusion Insurance in Africa

Agenda Africa Some Statistics Current Situation The Four Different Regions Microinsurance The Future in Conclusion Insurance in Africa

Africa Is Not A Country......... Insurance in Africa

......It’s A Continent Insurance in Africa

Agenda Some Statistics Africa Current Situation The Four Different Regions Microinsurance The Future in Conclusion Insurance in Africa

Some Statistics (2012) Total Premium per Country Penetration Rate = Gross value of Insurance Premiums/GDP Premium per Capita Region TotalPremiums (US$billion) PenetrationRate (%) PremiumsperCapita(US$) Advanced Asia 936 12 4,388 North America 1,393 8 3,996 Western Europe 1,463 2,716 Oceania 97 6 2,660 South & Central America 169 3 282 Central & Eastern Europe 73 2 223 Middle East 41 1 124 Emerging Asia 369 102 Africa 72 (17) 4 (1.04) 66 (16.5) World 4,613 7 656 Insurance in Africa

Some Statistics (2012) Life insurance penetration rate (excluding South Africa) is 0.27% with a density of US$5 per person per year Within the continent only South Africa, Namibia, Mauritius and Botswana have a spend more on life insurance over Non-life Insurance. Non-life insurance is slightly more popular with a penetration rate of 0.64% US$12.5 per person per year Insurance in Africa

Agenda Current Situation Africa Some Statistics The Four Different Regions Microinsurance The Future in Conclusion Insurance in Africa

Current Situation Financial industry still has some modernising to do Access to money through a formal bank network can be difficult High interest rate and account charges by banks Insurance in Africa

Current Situation Lack of trust in financial institutions Community comes to the aid of people in times of need Lack of reliable data on mortality and longevity and skilled insurance personnel Lack of big multi-national players Shallow financial markets make it difficult to raise enough money to capitalise insurance/re-insurance companies Non-life insurance is slightly more popular than Life Insurance in Africa

The Four Different Regions Agenda Africa Some Statistics Current Situation The Four Different Regions Microinsurance The Future in Conclusion Insurance in Africa

West Africa (Ghana) 89% of the population are uninsured Lack of payment of premiums was an issue. Sale of insurance on credit was common practice No premiums no cover policy was introduced to end this Huge issue as it stopped insurers from paying out claims and reinsurance (increased credit risk) Compulsory fire and commercial building insurance introduced in 2006 Funeral cover – funerals are a social event in Ghana High cost of funerals. On average cost is $7000-$8000 dollars however those in the business believe that the “Average funeral should cost between US$15,000 and 20,000” Insurers from South Africa, Morocco and the UK have entered the market Insurance in Africa

North Africa (Morocco) Conventional insurance forbidden in Islam Takaful insurance industry on the rise Second largest insurance market in Africa after South Africa Huge growth seen between 2006 and 2014 (about 6% p.a.) Mainly driven by non-life insurance premiums Car insurance the largest portion of this Physical injury (17%) and work-related injury (12%) Life insurance segment still lagging behind New Islamic law introduced which will foster growth Insurance in Africa

East Africa (Kenya) Industry dominated by non-life insurance (Over 60% of premiums) 41% of this insurance in car insurance Medical Insurance just over 20% Fire insurance 10% Life insurance penetration is 0.94% South African companies well represented. Penetration rate higher than in most countries. Mainly due to innovation Bancassurance also on the rise, less underwriting needed Disadvantage – brokers lose out on jobs Insurance in Africa

South Africa (South Africa) Exception to the rest of the rest of the continent Has a well developed life insurance industry Life insurance accounts for 81% of all insurance premiums (rest of the continent only accounts for 29.5%) High level of competition with the insurance market A highly developed financial industry High level of risk awareness Market nearing saturation Companies now venturing into the rest of Africa Lots of new business coming from the rest of Africa Insurance in Africa

Agenda Microinsurance Africa Some Statistics Current Situation The Four Different Regions Microinsurance The Future in Conclusion Insurance in Africa

Micro Insurance Insurance targets the a small, wealthy, part of the population Leads to a situation where a large part of the population is left unprotected Gives a need and an opportunity for micro insurance Microinsurance is insurance with low premiums and low caps / coverage Mobile Phones and the start of mobile money transfers, proved to be a game changer Microinsurance makes it possible for people to take more risks. When farmers are insured against a bad harvest (resulting from drought), they are in a better position to grow crops which give high yields in good years, and bad yields in year of drought. Without the insurance, however, they will be inclined to do the opposite; since they have to safeguard a minimal level of income for themselves and their families, crops will be grown which are more drought resistant, but which have a much lower yield in good weather conditions.[5] Insurance in Africa

M-Pesa M-Pesa is a money transfer service where users can use their mobile phones to store and transfer money Developed in 2005 but launched in 2007 after the regulators had conducted the required due diligence Insurance in Africa

M-Pesa Central Bank of Kenya (CBK), Communication Authority of Kenya and Ministry of Finance then assessed all associated risks before commissioning the project The CBK put in measures to ensure that minimum standards were met Loose regulatory structure which facilitated the development and success of the system Safaricom operates under a special license from CBK, whose conditions are more relaxed compared to those of banks and other financial institutions Insurance in Africa

Airtel Insurance (Kenya and Ghana) Open to anyone between the ages of 18 and 75 Cover linked to recharging of airtime for pre-paid customers and usage for post-paid customers For prepaid customers, cover is based on monthly recharge not usage Cover includes: Death Accidental Permanent Disability Hospitalisation Waiting period of one month for which only death by accident is covered. After first month full cover is given Payment made through company money transfer service for which registration is required Hospitalisation has to be for at least 3 continuous nights Insurance in Africa

MTN (Nigeria) Users can buy the insurance directly from their mobile phones No underwriting Agreed cash payment to a named beneficiary of a deceased subscriber, or to a subscriber in the case of permanent disablement as a result of accident However, there is no cover for demise/total permanent disability resulting from natural causes during the first 30 days of subscription Minimum age of entry 18years, maximum 60 years Insurance in Africa

Kilimo Salama (Kenya) Offer farmers who plant on as little as one acre insurance policies to shield them from significant financial losses when drought or excess rains are expected to wreak havoc on their harvests Payout based on severity of weather conditions measures by specific weather stations To be insured one has to be within 20kms of the weather station Premium paid when inputs are being purchased. Suppliers register their insurance and the farmer gets a notification on their phone Insurance in Africa

Barclays Bank (Kenya) Current Account, which attracts a flat monthly single fee to cover your day to day banking transactions and offers embedded retrenchment, funeral and hospital cash back insurance Funeral Insurance plan that Covers funeral expenses of up to 5 family members in addition to the account holder – Spouse, Parents and parent In–Laws Accidental Hospital Cash Back cover Travel Insurance embedded on the International debit card – offering many benefits including Medical & Repatriation Expense cover Retrenchment cover which pays 3X your monthly salary  Insurance in Africa

The Future in Conclusion Agenda Africa Some Statistics Current Situation The Four Different Regions Microinsurance The Future in Conclusion Insurance in Africa

The Future in Conclusion Insurance in Africa

QUESTIONS??

The Australian Connection Next event 6 April or early June 2017 (date to be confirmed) The Australian Connection

Please join us for drinks and talks