REGULARTORY BOTTLENECKS/BARRIERS TO TRADE IN INSURANCE SERVICES PRESENTED AT THE AFRICAN UNION/ RECS WORKSHOP ON TRADE IN SERVICES MARCH 2012, LUSAKA, ZAMBIA BY : LYDIAH MAAMBO SIBANDA (ACII) MANAGING DIRECTOR NORWICH INSURANCE BROKERS LTD TRUSTEE – INSURANCE BROKERS ASSOCIATION OF ZAMBIA

REGULATORY BOTTLENECKS/BARRIERS TO TRADE IN INSURANCE SERVICES THE ZAMBIAN EXPERIENCE

OUTLINE OF THE PRESENTATION Introduction The Zambian Insurance Market Regulatory Bottleneck/Barriers to Trade in Insurance Services Recommended Solutions Conclusion

Introduction In dealing with the subject of barriers to trade in insurance services, I want to state from the outset that these barriers are more complex than barriers to trade in goods due to the fact that: Foreign service providers are not only restricted by barriers to entry but also the Policies of the host country as well as regulations of domestic suppliers.

Barriers to trade in Insurance services like any other services are to be analyzed and classified in the four modes of supply. These being : - Mode 1: Cross Boarder Trade - Mode 2 : Consumption Abroad - Mode 3 : Commercial Presence - Mode 4 : Movement of natural persons

The Zambian Insurance Market The Zambian Insurance Market currently consists of the following; 14 general Insurance Companies 8 Life Assurance Companies 2 Re-Insurance Companies 1 Re-Insurance Broker 41 Insurance Brokers 245 Insurance Agents

Gross Underwritten Premium Non life-$167million Life -46million

REGULATORY BOTTLENECKS/ BARRIERS TO TRADE IN INSURANCE SERVICES The Zambian Experience 1.Lack of harmonized legislation on Insurance in Africa. Legislation relating to compulsory treaty sessions which are common in some African countries are not so common in most of other African countries. When the company is negotiating Re-Insurance treaties, they have to take into account various laws relating to compulsory sessions in all the countries they operate.

Legislation relating to Third Party Liability Limits. Some countries in Africa have unlimited third party liabilities on their motor policies this can at times pause great exposure to foreign service providers and thus stands as a barrier or bottleneck.

2. High Capital entry requirements. Some of the countries in Africa have very high capital entry requirements, which sometimes prove to be prohibitive. I must however state here that high capitalization in itself is a good measure to avoid capital flight through re-insurance as lowly capitalized insurance companies tend to retain very low levels of risks..

3. Empowerment /Protection laws relating to the locals. The regulations relating to the empowerment of the locals is a positive one in terms of empowering the citizens however if the percentage reserved for the locals is too high, the potential investor may have second opinions in investing into another country

4. Culture of doing business and Language barriers. Different countries in Africa carry out business in different business environments, languages and culture. Tender documents that are crafted in different languages create a disadvantage to some service providers as they have to first interpret the tender documents before the can start working

5. Lack of recognition of insurance polices issued by players in other countries. Eg. A policy holder with a full comprehensive motor policy travelling between countries is required to buy additional cover as he drives through three or four countries.

6. Inadequate information exchange amongst Regulators. Regulators in Africa are not exchanging information relating to various aspects of their markets as a result players tend to know of the requirements of the other country when they intend to export their services. Note should be taken that there are efforts to address this by the regulators.

7. Lack of mutual recognition of qualifications in the region. Without mutual recognition of the various qualifications in insurance there will always be complications in the movement of natural persons across countries.

Recommended Solutions 1.There should be increased collaboration and co-operation amongst players and regulators in Africa, this will lead to common/similar regulations and standards governing the insurance business in Africa the result of this will be increased crossed boarder trade in insurance services within the Africa.

2. Creation of smart partnerships by private sector. By working with the locals, the potential investors will easily acclimatize with the work culture and procedures of the host country. 3. Increase co-operation and information exchange amongst the private sector using their associations and information technology i.e. posting of policy document wordings on their websites.

4. Players in Africa should take advantage of the frameworks that are being put in place by the various RECs to agree on common regulations regarding the various bottlenecks/barriers. These include; Third Party Limits of Liabilities on motor insurance How to treat policies issued in different countries. Rules regarding movement of Natural Persons.

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