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Presentation on theme: "CORPORATION OF TANZANIA"— Presentation transcript:



3 INTRODUCTION 1:0 Insurance is defined by the Oxford English Dictionary as “The act of securing the payment of a sum of money in the event of loss or damage to (property, Life, etc.) by payment of (a) premium(s).

4 1:1 The basic methods of Handling Risks
There are various risk management tools used to carry out the transformation of risks; these range from: Insurance/Reinsurance; Risk pooling; Alternative Risk Transfer.

5 1:2 Role of Insurance in Society
Insurance is a risk transformation mechanism. In day to day business operations insurance is used as: Source of capital support; Risk Management tool; Provider of savings vehicles; Risk spreading.

6 ….. Continued Role of Insurance …..
Insurance business though has always been “International” through spreading risks by reinsurance rationalization and globalization has also brought changing environments within the industry Competition from new players, products which were traditionally sold by Insurance companies are now being sold by different players altogether such as Banks, Supermarket and other retailers.

7 ….. Continued Role of Insurance …..
Emergence of new risks and new products. Traditional Insurance used to cover accidental damage, theft, death etc., today we are witnessing Insurance cover available for: Weather interrupting a family holiday; Hole in one at a golf course; Contracting Disability, etc.

8 ….. Continued Role of Insurance …..
Harmonization: Harmonization of rules and laws to meet legislatives requirements. Insurance Industry like other financial Institutions in many countries is subject to statutory regulation.

2:1 The main purpose of my presentation:

10 COMESA Continued…… Is to share experience on available regional insurance scheme which is shared by member countries under COMESA. The Common Market for Eastern and Southern Africa (COMESA) is a regional integration grouping of 20 African sovereign states:-

11 COMESA Continued ……. Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe, which have agreed to promote regional integration through trade development and the development their natural and human resources for the mutual benefit of all their people.

12 2:2 Regional Motor Vehicle Insurance Scheme (Yellow Card)
Development of trade involves among other things movement of goods from one county to another and the most common method is by vehicles. Each country had its own third party liability motor Insurance requirement. Motorists crossing borders therefore had to take fresh cover at each border. The Yellow Card was developed to solve this problem.

13 The main objectives of the Yellow Card Scheme are to:
Provide at least minimum guarantee, as those required by the laws in force in the territories of the parties to the Protocol, when the vehicles insured are transiting the territories of other contracting parties; Provide guarantee for road accident victims, fair and prompt compensation for damage or injury they may have sustained as a result of road traffic accidents; Facilitate the smooth movement of vehicles between member States;

14 Yellow Card Continued……
Encourage the greater movement of persons and goods and promote the development of intra-COMESA trade and tourism; and Provide to the Insurance Industry, a simple and economical mechanism to operate. The scheme has been operational for the past fifteen years. Member countries that are party to the Scheme are: Burundi, Democratic Republic of Congo, Eritrea, Ethiopia, Kenya, Malawi, Rwanda, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.

15 2:3 Scheme Management The scheme is administrated by a network of National Bureaux designated by each member countries. A National Bureau is a National focal point representing insurance companies issuing Yellow Cards: Insurance Companies authorised to underwrite motor insurance business in the country. The National Bureau is responsible for the administration and control of the operations of the Scheme in its own country.

16 Scheme Management Continued ………
The National Bureaux are multilaterally committed through an Inter-Bureaux Agreement and have reciprocal arrangements among themselves. In the sense that each National Bureau has undertaken to handle and settle claims on behalf of member National Bureaux, which arose from accidents involving visiting motorists.

17 Scheme Management Continued ………
At a regional level, the National Bureaux constitute a council of Bureaux. The Council of Bureaux is the highest body to co-ordinate and supervise the legal, administrative and financial operations of the National Bureaux and the Yellow Card Scheme. The COMESA Secretariat is the Interim Secretariat for the Council of Bureaux.

18 Scheme Management Continued ………
The scheme has since been expanded to cover property damage (which is not covered by Insurance ordinance in some member countries) and medical expense for motorist and passengers should they suffer bodily injury as result of an accident. One of the challenges is to harmonise the laws and regulations of member countries that govern the civil liability for motor vehicle third party liability.

19 2:4 Performance in figures
It is estimated that over 60,000 vehicles use Yellow Cards annually. The number of companies issuing Yellow Card is now over 160.

ITEM NO. YEAR NO. OF YELLOW CARDS ISSUED PREMIUM COLLECTED IN US DOLLAR 1 1998/99 29,423 968,089.00 2 1999/00 22,138 557,981.00 3 2000/01 28,767 938,737.00 4 2000/02 25,936 785,501.00 5 2002/03 38,477 1,712,517.00 TOTAL 144,741 4,962,825.00

21 2:5 The scheme has its own pool which was funded by members, each member contributed USD.100,000.00, the pool known as Yellow Card Reinsurance Pool is managed by ZEP RE (PTA Reinsurance Company) based in Nairobi.

Article 14 (1) 1) The persons liable under Article 4 shall establish and maintain during the period of the time limit of liability, insurance, bonds or other financial guarantees covering their liability under Article 4 of the Protocol for amounts not less than the minimum limits specified in paragraph 2 of Annex B.

23 BASEL PROTOCOL Continued ……..
States may fulfill their obligation under this paragraph by a declaration of self-insurance. Nothing in this paragraph shall prevent the use of deductibles or co-payments as between the insurer and the insured, but the failure of the insured to pay any deductible or co-payment shall not be a defence against the person who has suffered the damage.

24 Damage means: Article 2 (c ) 2)
Loss of life or personal injury; Loss of or damage to property other than property held by the person liable in accordance with the present Protocol; Loss of income directly deriving from an economic interest in any use of the environment, incur=red as a result of impairment of the environment, taking into account savings and costs;

25 Damage means: Continued …….
The costs of measures of reinstatement of the impaired environment, limited to the costs of measures actually taken or to be undertaken; and The costs of preventive measures, including any loss or damage caused by such measures, to the extent that the damage arises out of or results from hazardous properties of the wastes involved in the transboundary movement and disposal of hazardous wastes and other wastes subject to the Convention.

26 3:1 Insurance exclusion Risk required to be covered under the protocol are in general exclusions under Insurance contracts. It is indicated that Governments may declare self insurance in order to meet the requirement for Article 14. It is however, noted that in many instances the “so called self insurance fund” does not exist,

27 … this is mainly because Governments respond after events and rely on budgets, including diversion of Resources from other project etc. It is therefore not possible or rather difficult for self insurance to work.

28 4:0 CREATION OF POOL 4:1 Definition of a Pool
Combination of resources, funds to handle a similar problem. Governments can react to this requirement of the protocol by creating a pool.

29 Definition of a Pool Continued ……….
Pools are created in most case to address the issue of :- Insurance un-affordability Insurance un-availability Pools provide risk financing and capacity.

30 4:2 Types of Pools Pools can be funded or non-funded.

31 4:2:1 Funded Pools AFRICA RE ZEP RE (PTA Reinsurance Company)
Examples:- AFRICA RE Set up with limited liability by member countries of the then Organization of Africa Unit (OAU). ZEP RE (PTA Reinsurance Company) ATI – African Trade Insurance Agency Set up by World Bank fully funded credit to ATI members to back up Insurance policies. Provides cover for political risks, credit Insurance, as well as non payment and Foreign Direct Investment. The risks covered by ATI are not available under normal insurance covers.

32 4:2:2 Non-Funded Pools Examples: Federation of African of Afro-Asian Insurers and Reinsurers Aviation Pool. African oil and energy pool. African Aviation Pool The aim of non-funded capacity is in many cases to give each other protection and business, normal a member company is appointed to manage the pool.

33 4:2:3 Intergovernmental Risk Pools
Japan Pools known as (Kyousai) were formed in the late 1940’s and continue to operate successful. These are local government risk financing. United States of America began to operate pools in mid-1970’s. It is estimated that there are over 400 pools operating in the USA. Pools can also be found in Australia, Canada, Netherlands.

34 4:2:4 The performance of most of the pools show that pools are doing well and achieving their objectives. Example of few:-

35 African Oil and Energy Pool: Capacity USD. 2.6 m.
GPW (USD) U/W Result Trading Result 2000 1,659,058 (298,180) (355,966) 2001 4,256,207 692,715 493,405 2002 5,640,472 856,409 610,474

36 African Aviation Pool: Capacity USD. 3.4 m.
GPW (USD U/W Result Trading Result 2000 1,682,373 133,664 32,560 2001 2,431,380 1,091,222 961,988 2002 3,356,115 884,251 600,241

37 5:0 RECOMMENDATION Since hazardous wastes are an exclusion under traditional insurance covers, the best approach would be for the respective Governments to set up a pool to handle such risks.

38 6:0 CONCLUSION I thank the workshop organizers for giving me an opportunity to participate in this workshop. I hope I have been able to kick start a way forward which will help promote this important protocol, more work will have to be done if the workshop will decide on creation of a pool as a solution. Let me share with you this statement which I came across on GAPS IN INSURANCE COVERS. “There are many problems associated with Insurance as it stands today. Even without the impact of climate change, Insurance poses a number of major problems.

39 CONCLUSION Continued …. …….
First, 80% of losses are not insured at all. Second, it represents a very inefficient process, where 30% of funds collected are not recycled to victims. This percentage is even higher in third world countries. Third, Insurance is generally restricted to rich people. Fourth, product design has resulted in short term, restrictive products. This has negative consequence for the rest of the Financial Industry. Finally, there is lack of capital with unstable prices and volatile demands”.

40 REFERENCE: COMESA Yellow Card manuals. FAIR Review No. 132 June, 2004
C.I.I. Insurance Research and Practise Vol. 16 January, 2001. UNEPFI – Finance, Environment and sustainable Development European Seminar.

41 Thank you for your attention.


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