In Discussion with Dr. Corneille Karekezi, Group Managing Director/Chief Executive Officer, Africa Re Group
By Reinsurance News
Reinsurance News, December 2021
He rose to the current position of group managing director/chief executive officer of Africa Re in July 2011 after a transitional period of two years during which he served successively as deputy managing director and deputy managing director/chief operating officer. Before that, he served on the board of Africa Re from 2003 to 2005.
Dr. Corneille Karekezi,
group managing director/chief
executive officer, Africa Re Group
His professional career started in 1991 as chief accountant/reinsurance manager of the leading insurance company in Burundi (SOCABU s.m.), where he rose to the position of head of the Finance Department. In 1995, he joined the leading insurance company in Rwanda (SONARWA s.a.) as deputy head of the Commercial & Technical Department. From 1996, he successively headed all the Technical Departments (Motor, Fire, Accidents & Miscellaneous Risks, and Life) before he became the deputy managing director in early 2001. In February 2008, Dr. Karekezi was appointed chief executive officer of SONARWA s.a.
Dr. Karekezi holds a Bachelor’s Degree in Economics (Burundi), Postgraduate Diplomas in Business Administration (UK), a Masters Degree in Management (Burundi), an Honorary Doctorate of Business Administration (UK) and a Doctorate of Business Administration (France & Israel).
He fluently speaks English, French, Swahili and other African languages.
Since 1996, he has contributed significantly to the development of the insurance/reinsurance industry in Africa through his involvement and leadership in various national, regional and continental projects, initiatives and organizations, as well as his active participation as a speaker in seminars, conferences, forums, and symposia across the world.
He has served as chairman and director of various governing bodies of financial institutions at national and continental levels in Africa (Africa Re, Shelter Afrique, COMESA Yellow Card Scheme, IMANZI Professionals & Entrepreneurs Association, etc.). He is currently the vice-chairman of Africa Re (South Africa) Limited and Africa Retakaful Corporation (Egypt) and a Permanent Member of the Executive Committee of the African Insurance Organization (AIO) where he chairs its Finance Committee.
Reinsurance News (RN): Africa Re has been in business for over 45 years, can you introduce the corporation to us?
Corneille Karekezi (CK): The African Reinsurance Corporation (herein Africa Re or the Corporation) is a successful pan-African and multilateral organization established in 1976 by 36 African states, following a recommendation of the African Development Bank (AfDB) with a mission to foster the development of the insurance and reinsurance industry in Africa, to promote the growth of national, regional and sub-regional underwriting and retention capacities, and finally to support African economic development.
From a modest authorized capital of US$15 million of which US$10 million was subscribed and US$5 million was paid up, the Corporation now has an authorized capital of US$500 million of which US$285.86 million is paid up. Based on the 2020 audited financial statements, the Corporation achieved a gross written premium of US$804.77 million (the largest in Africa and the Middle East) from over 80 countries in Africa, the Middle East, South East Asia and Brazil, with the shareholders’ fund exceeding the US$1 billion mark. The cumulative gross written premium income and net profit since 1978 amount to US$12.15 billion and US$1.22 billion respectively.
With a financial strength and credit rating of A (Stable) by A.M. Best and A- (Stable) by S&P, Africa Re is the highest-rated African reinsurer, with offices in Nigeria, Kenya, Morocco, Mauritius, Côte d’Ivoire, Egypt, Sudan, United Arab Emirates, Ethiopia and South Africa, providing reinsurance services to the whole of Africa and selected key strategic international markets.
RN: What are the key drivers of Africa Re’s success?
CK: Over the last 45 years, the Corporation’s success has been driven by a strong belief in the pan-African story, quest for excellence and commitment to the corporate mission by successive generations of staff, executive management and board of directors, sustained by the unwavering support of our shareholders.
Africa Re is an African organization largely owned and solely run by Africans whilst complying with the best of international standards. Our resilient and competent workforce, strong corporate governance and stable leadership are the critical elements of the achievements we see today.
It is important to say that Africa Re has not had any political interference from its African member states. Indeed, voting power in the general assembly of the Corporation is balanced (no more than 8 percent for any group of shareholders) and diversified (African states, African private companies and non-African global leading companies). Hence, strategic and managerial decisions are taken based solely on the best interests of the Corporation and the fulfillment of its mission. The board of directors and general assembly operate in the same way as private organizations.
Our business model is built around client focus and driven by our philosophy of proximity, cultural intelligence and market knowledge as well as a motivated and competent workforce. While we benefit from compulsory cessions (5 percent of treaty business) as outlined in our establishment agreement with member states, almost 95 percent of our business comes from voluntary cessions on competitive and commercial terms.
RN: The recent years have been eventful for the insurance industry, what are your thoughts on the trends?
CK: In the last 18 months, the COVID-19 pandemic and subsequent economic downturn and work-from-home (WFH) practices have dominated the discussion in our industry, with some landmark court decisions around business interruption claims resulting from government-imposed lockdowns. In addition, we have also seen an increased focus on the issue of cyber security, accentuated by remote working and a rise in cyber incidents, particularly ransomware attacks.
But that’s not all. The insurance industry is reckoning with a rise in the frequency and cost of political violence events, for example, the riots and civil unrest we saw in Nigeria in October 2020 and South Africa in July 2021. Catastrophe claims from extreme weather events such as floods, droughts and cyclones, will continue to be a hot topic. On the back of these challenges, the industry has accelerated its digitalization journey, with technology expected to significantly impact how we conduct insurance business.
These important issues have triggered further discussion around the topic of product innovation, contract wording quality and certainty, for instance regarding the coverage of communicable diseases and cyber risk. The huge economic losses due to the civil unrest and the apparent gap in insurance coverage, particularly following Nigeria’s #Endsars protests, are of concern to us. We continue to grapple with the problem of low insurance penetration in much of sub-Saharan Africa. For Africa Re and the industry at large, the issue of climate risk remains on our radar and we are actively engaged in the process of bringing to life the required transformations around the topic and Environmental, Social and Governance (ESG) in general.
Based on the magnitude of these challenges, it’s important to explore all viable risk transfer models to address insurability elements in risks of a systemic nature. Governments need to play their part, in partnership with the insurance industry, to close the existing protection gap and reduce the likely systemic shocks from such events.
RN: How do we address the issue of low insurance penetration on the continent?
CK: The low insurance penetration in developing countries, particularly in Africa, is due to a multitude of factors. In 2019, the insurance penetration in Africa was estimated at 2.78 percent against the world average of 7.23 percent, with only South Africa and Namibia above the world’s average according to available data.
The three most significant factors contributing to this are: affordability due to low purchasing power, with a significant segment of the population below the poverty line; limited literacy in modern and formal risk management, or more specifically insurance illiteracy; and the low financial inclusion of the majority of African populations.
Other factors include the negative perception of the insurance industry due to past experiences on poor claims payment records, unclear insurance covers that breed disputes, over-reliance on traditional informal social insurance schemes, and the lack of appropriate products that address the needs of those who are not covered. Significant efforts need to be made by all stakeholders in the value chain (brokers, insurers, reinsurers, industry associations, industry regulators, government and other strategic partners) to invest in the financial education of the population about insurance. Insurance companies need to come up with innovative products in terms of risk packaging, product packaging, distribution channels, premium payment and claims payment to address especially the particular needs of the low-income population. Partnerships with players outside the industry such as technology companies, financial institutions and telecommunication companies will be essential for success.
RN: What are the market trends of the African insurance industry?
CK: One of the trends in Africa is the hardening of premium rates in loss-making lines of business and occupancy types. Over recent years, there has been a bad loss experience in corporate property lines in countries like South Africa and Kenya as well as in the energy sector in Francophone Africa. Medical insurance covers have also seen a tightening of terms with insurers eager to price COVID-19 cover. The pandemic has also led to less insurer appetite for recession-prone lines like credit insurance.
However, it should be noted that in many markets, competition for profitable business remains rife as regulators and local associations continue to devise ways to eliminate rate cutting that makes the entire industry financially unsustainable.
Another trend is the upward review of the minimum paid-up capital that allows insurers to retain more business. This policy is also supported by insurance business domestication laws in many African countries. With the increase in paid-up capital, more mergers and acquisitions are expected, with major international insurance groups investing in local insurance companies to provide much-needed diversification to their home country portfolios and to strategically position themselves for new growth opportunities.
The continued devaluation of African currencies, coupled with the weakening of economic fundamentals due to the COVID-19 pandemic, remains a major concern for (re)insurers. The reported underwriting performance is expected to be impacted, at least in the near- to medium-term. The low-interest-rate regime continues to have an impact on (re)insurers’ investment strategies. On the business efficiency front, the pandemic has also elevated the role of digitization and companies are investing heavily in digital infrastructures to keep their business running, and future-proof. In general, it is expected that the insurance industry will evolve positively and so many things will not be the same again based on the gains from digital innovation.
RN: What is the role of digital innovation in addressing the protection gap?
CK: The digitization trend on the continent can help to spur innovation in the insurance value chain. This includes both product innovation and process innovation. Product innovation will ensure more streams of income and more choices for customers. Process innovation, on the other hand, leads to a cost-effective way to deliver services to the customer. The need for innovation cannot be overemphasized.
Africa Re is supporting the continent on this journey with the introduction of “innovation of the year” in its annual industry recognition and awards program since inception in 2015. This promotes the required investment in process and process innovation by existing industry players. In 2019, another category to support digitization called “InsurTech of the year” was introduced to encourage technology companies to partner with insurers to create white-labeled agnostic platforms that are reusable and cost-effective.
As a market leader, we have also engaged industry players under the aegis of the African Reinsurers Association (ARA) to explore and exploit the potential of distributed ledger technology popularly called blockchain that birthed the African Reinsurance and Insurance Blockchain Initiative (ARIBI). This idea is conceptually viable and we are working with our technical partner to develop a prototype to be evaluated by market players. Based on the outcome of numerous industry efforts, blockchain has demonstrated that it can improve operational efficiency, eliminate frictional costs and reduce moral hazard by providing an immutable single source of the truth.
As a reinsurer with insurance know-how, we are focused on helping to connect the dots between digital innovations and insurance product or process realization. We support endeavors that create an effective insurance expertise and technology architecture capable of realizing tangible progress toward more inclusivity and insurance penetration. That is the end game.
RN: There is a buzz around the African Continental Free Trade Area (AfCFTA), what are your thoughts around it and the opportunities for the African insurance industry?
CK: AfCFTA is the latest audacious and potentially rewarding initiative of African nations to establish a joint marketplace that will encompass 55 countries, about 1.3 billion people and a combined gross domestic product estimated at US$2.5 trillion. The implementation phase begins in January 2021. Today’s trade restrictions within Africa, whether physical, legal or bureaucratic, are more than those with the rest of the world. While intra-regional exports amount to roughly 50 percent of trade in Asia and 69 percent in Europe, in Africa only 17 percent of exports remain within the continent according to recent estimates.
The AfCFTA initiative is a blessing to the insurance industry as it consolidates all the ongoing reforms running in silos aimed at building stronger companies capable of having a regional or continental pedigree. The role of the insurance industry in the economic development of Africa cannot be overemphasized as it provides necessary risk management tools and financial security to governments, businesses and individuals. I believe that if well implemented, it will increase cross-border insurance trading, leading to larger markets, greater diversification of insured risks, more choice to consumers and better insurance practices.
However, all stakeholders (insurers, reinsurers, brokers, industry associations, industry regulators, governments and other strategic partners) need to be actively engaged and the heterogeneity of African economies needs to be considered since Africa is not a single country. Continental insurance industry associations like African Insurance Organization (AIO), as well as regional bodies, can play an important role in coordinating all stakeholder insurance requirements for AfCFTA and steering the articulation and realization of our goals.
While we may draw lessons from other economic integration initiatives like the European Union, we must customize our vision to the needs of Africa. The success of this initiative will depend on the exercise of professionalism through mutual trust and defined ethics. AfCFTA presents a not-to-be-missed opportunity supported by an unprecedented political will for every industry sector to seize on the enormous potential of intra-regional trade to boost performance and enhance value for all participants. Africa Re’s success story is proof that this can be achieved and no efforts should be spared in making a success of this important initiative.
RN: What can you say about IFRS 17 and the readiness of the African insurance industry?
CK: The transition from IFRS 4 to IFRS 17 is progressing slowly but I believe that we will be ready for the cut-off date set for Jan. 1, 2023. The industry is engaging implementation partners that have worked with players in advanced economies. This is coupled with less complexity associated with insurance products on the continent. It is expected that companies will approach their implementation from a forward-looking perspective as the market evolves. However, the issues of data quality and policy decisions will need to be addressed quickly and thoroughly. The African insurance sector must continue to invest heavily in data systems, data quality, data expertise and related infrastructure. IFRS 17 requires a lot of actuarial input for which there is a shortage of related human resources. Africa Re is ready to work with industry associations and regulators to build this capacity.
RN: What are your hobbies and what do you do for fun?
CK: The role of a CEO is demanding and it is necessary to build a life outside work to recharge your mental and physical sharpness. I am a physical fitness enthusiast, passionate book reader, sports lover and a passionate music writer, singer, and producer.
I make a conscious effort to exercise at least three times a week and visit a gym as often as possible to recharge my physical energy and mental strength. On sports, I love football, basketball and athletics as a big fan. My passion for music is personal to me and is related to gospel music.
RN: In conclusion, what does success mean to you and your message to young professionals, especially actuaries?
Success is incremental progress through the different cycles of learning, unlearning, and relearning. As the saying attributed to Winston Churchill goes, “Success is not final and failure is not fatal. It is the courage to continue that counts.” My message to young professionals is to imbibe the ethos and philosophy embodied by Rudyard Kipling’s inspirational poem, “IF.” It serves as a blueprint for self-control, self-awareness, self-belief and self-leadership. It promotes hard work, humility, honesty, resilience, and determination as it increases the odds of success in all areas of life.
For actuaries, they must continue to live by their professional code of ethics and independence because corporate boards, industry regulators and external auditors rely on the outcome of their work to make decisions. In Africa where there is a skills shortage, the actuary is also required to be versatile. This implies that they must understand the overall business landscape and general practices. As actuaries do not work in a vacuum, it is pertinent to build people and collaboration skills for success in the role. Most of all, it is paramount that actuaries master the art of communicating the results of their work in a manner that is effective, instructive, but also relatable. It goes beyond the numbers—it’s the ultimate decision-making that defines the success of actuaries.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective author’s employer.
Dr. Corneille Karekezi is group managing director/chief executive officer, Africa Re Group.