Ethiopia: Zep Re Opens Ethiopian Office in Reinsurance Push

by Zelalem

The office targets on servicing all insurance companies in the local currency

ZEP RE, a regional reinsurance company, has opened its office as a window of opportunity in Ethiopia’s closed financial sector, becoming the eighth office in Africa since its establishment in 1992.

The opening of the office was launched in a ceremony held at Sheraton Addis Hotel last Tuesday, in the presence of representatives from ZEP RE, insurance executives, agents and other stakeholders.

The office will give a new edge to ZEP RE, also known as PTA Re-insurance, to tap Africa’s second largest market by population, which has reached over 100 million, according to the Company.

Located along Democratic Republic of Congo Street near the regional office of the United Nations Conference on Trade and Development (UNCTAD), it is opened after the National Bank of Ethiopia (NBE) signed a hosting agreement with the company six months ago.

“Our primary aim of opening an office is to be closer to our clients in Ethiopia,” said Hope Murers, managing director of ZEP RE.

The newly opened office will function under reinsurance licences and targets on servicing all insurance companies in the local currency, aiming to save 20 million dollars of foreign exchange annually.

“No money will go out of the country, it will rather be invested in various areas,” said Murers. “We have opened an account at the Commercial Bank of Ethiopia (CBE) to make all transactions with insurers.”

Founded in Swaziland, ZEP RE is owned by 33 shareholders, with the Trade & Development Bank holding the largest stake. Among the shareholders, half of them are African nations with the rest being owned by corporate institutions.

Over the past two decades, ZEP RE has been working with various insurance companies in the country using its office in Nairobi. Ethiopian Insurance Corporation, Awash Insurance Company and Nyala Insurance are the major clients of the Company.

ZEP RE, whose written premium was 161 million Br in 2016, targeted to write a premium of 230 million Br in its first year of operation inside Ethiopia. Ethiopia is the second largest market for ZEP RE, representing 7.6pc of reinsurance business in the country.

The move of ZEP RE is said to be a game changer as Ethiopia heavily restricts foreign investors from venturing into the finance sector, according to industry insiders.

“As a part of our strategic plan, we are looking for new business opportunities in Ethiopia,” said Hope. “We expect to utilise our physical presence to engage more in the area of investment.”

Although many insurance companies have attempted in vain to enter Eastern Africa’s most restricted economy over the past few years, only one of them has succeeded to open an office in the country.

Opening an office six years ago, African Re is the only foreign-owned insurance firm which has opened an office in Ethiopia so far.

ZEP RE launched its office 11 months after the Ethiopia Re, the first local private reinsurer, became operational with a paid up capital of half a billion Birr. Founded by 17 insurers and 17 banks, Ethiopia Re commenced operation with the aim of minimising hard currency outflow as reinsurance business is mainly controlled by international reinsurance companies.

Last year, the insurance industry leveraged a premium of six billion Br; of these 34pc goes to reinsurers as the insurance companies are not fully capable of taking high risks.

The concentration of risks, which regularly suffers serious disasters, grabbed the interest of foreign reinsurers in the market. Last year, insurers paid over 70pc of their premium as a claim.

The entrance of ZEP RE, which has a presence in 50 countries with an investment portfolio of 200 million dollars, to the Ethiopian market seems a welcome move according to some industry insiders.

“It will raise ZEP RE’s understandings about the risk pattern of the Ethiopian insurance industry,” said Yared Molla, chief executive officer of Nyala, explaining the benefit of the new office. “Now, we can easily walk to their office to get service.”

Nevertheless, the Ethiopian insurance industry, whose contribution is below one percent to GDP, has been experiencing a profit decline over the past two years. Insurers tend to compete using price cutting and affiliation, which results in unhealthy competition. As a result, last year, over ten insurers reported a dwindling profit. Also, the same number of firms registered a drop in shareholders’ return during the same period.

“Insurers must wake up,” said Murers. “Right pricing is essential for the survival of the industry.”

The same day the new office launched, ZEP RE announced that Tigist Shiferaw, a former underwriter at ZEP RE Kenya, will be a country manager of the newly inaugurated Office.

For now, ZEP RE has no plan to repatriate their profit.

“Our aim is to reinvest all of our profits in Ethiopia,” said Tigist. “Our aim is not only to earn benefits but also to benefit members under the Common Market for Eastern & Southern Africa (COMESA) countries.”

Read More News Here Source link

Related Posts

Leave a Comment