The African Trade Insurance Agency (ATI) is pleased to announce the joining of the Republic of Cameroon as its 19^th African Member State. Cameroon has joined with a subscribed capital contribution of EUR 11.37 Million, following financial support from the European Investment Bank (EIB) for the country’s membership in ATI.

Cameroon’s membership in ATI will enable the Central African nation to benefit from ATI’s Guarantees to attract more foreign direct investments, and boost regional and international trade. Whereas ATI’s risk mitigation and credit enhancement tools act as catalysts for the strengthening and diversification of the country’s economy, the Government of Cameroon will also be in a position to access a viable option to help in its quest to reign in debt levels.

Membership in ATI has come at the opportune time as it is aligned with Cameroon’s national development strategy 2020 – 2030 (NDS30), whose objectives include becoming an emerging country with enhanced exports and opening up of local markets to foreign direct investments. ATI’s existing pipeline of solid projects, mainly in the financial and manufacturing sectors, will provide a good foundation to the realization of the country’s national development strategy (NDS30).

ATI has covered several of the flagship projects that are identified as core to the national strategic plans in Africa. These projects are key to boosting socio-economic development and generating Foreign Direct Investments inflows. ATI expects to continue playing a pivotal role in the implementation of these flagship projects in the continent.

On behalf of the Government of Cameroon, Mr. Sylvester Moh Tangongho, Director General of Treasury, Monetary and Financial Cooperation of the Ministry of Finance said: “Cameroon is delighted, thanks to the concretization of its partnership with the EIB, to officially join the shareholding of ATI. It is an important event for our country, which is resolutely turned towards the appeal and support of national and foreign investors. ATI offers us additional guarantees in this regard. This being the case, we are counting on ATI, by popularizing its services, to interest both our government, the entire network of insurers based in Cameroon, as well as investors, in the real added value that this membership offers them.”

Manuel Moses, CEO of ATI, noted, “We thank the government of Cameroon for its commitment to ATI, which marks a welcome expansion in the Central African Region. We applaud this strong vote of confidence and look forward to working closely with the government and the private sector to identify priority projects and offer our robust risk mitigation solutions for Cameroon’s post-pandemic economic recovery and development financing initiatives. We also thank the European Investment Bank for its continuous support.”

Thomas Östros, Vice President of the European Investment Bank, commented “Unlocking investment and facilitating trade is crucial for economic development and strengthening resilience to the diverse health, business and social challenges posed by the COVID-19 pandemic. The European Investment Bank is pleased to support Cameroon’s membership of ATI that will allow the country to benefit from investment insurance essential for sustainable growth in the years ahead. As the EU Bank, the European Investment Bank is committed to supporting private sector and sustainable infrastructure development across Africa through close cooperation with African and European partners. This new joint engagement in Cameroon builds on the close cooperation between ATI and EIB across the continent.”

ATI’s membership drive is partly supported by the European Investment Bank, which to date has provided a combined EUR 49.11 million (approximately US$57.5 Million) in concessional lending for the membership subscription of Benin, Cameroon, Niger and Togo. The EIB is also supporting Chad, Burkina Faso and Senegal, all expected to join in the coming months.

AIICO Insurance Plc said it has strategised to take the lead in enhancing customers experience and satisfaction through the embedded insurance concept which is presently transforming underwriting practice.

Embedded insurance, which is presently gaining traction across the globe, according to experts, has the potential to grow into a trillion-dollar market.

AIICO Insurance said as a forward-looking underwriting firm, it has signed partnerships with two firms to drive the concept.

According to its Divisional Head, Shared Services, Olusanjo Shodimu, the firm is enlarging its frontiers in the retail market space through the embedded insurance concept.

“We have adopted two approaches to managing micro insurance. What we are doing is seeking partnership by identifying people operating within the space of business we want to do. There is a new concept called embedded insurance, that is partnering people with large customer base and putting insurance on their platforms,” he said.

According to global reinsurance expert Munich Re, embedded insurance has grown out of simple device protection and warranty products to more complex motor insurance coverage; and is expected to develop even further into other lines of business once data privacy concerns have been resolved.

Munich Re has identified the underlying digital processes of embedded insurance as strategically important and has therefore implemented many of the underlying tech trends with its product expertise. As part of our consulting expertise, we pass on this added value directly to our clients in the form of solutions such as fully API-driven automated underwriting, portfolio analysis or via our Insurance Analytics Marketplace”, the global reinsurer said.

It further said embedded insurance sounds like a logical and simple next step in digitalisation but in reality, it is a massive change within the business model.

“If products are offered together with insurance coverage for them, then insurers with product expertise will be able to offer customers a great deal of added value”, it said..

Continuing on the concept, Munic Re said: “Offering risk protection when purchasing a product or service like a car, mobile phone, vacation, or even an event cancellation like a concert has been commonplace for years. Previously, there was insurance on the product, but the technology behind it was not integrated”.

We now call this the B2B2C business model “Embedded Insurance” (EI) since the insurer as well as business partner is becoming more tech-savvy and products and protections are now being offered in a single and seamless journey. Insurers need to have a dedicated organisation and have to own a modern, evolutionary IT architecture to be able to partner successfully with OEMs, retailers, telcos, etc. Most importantly, they need to best serve the insured, not only during automated quote and policy issuance but also in case of a loss. Technical integration is of enormous importance in the sale of policies and also in the recording of claims in order to keep the costs of requests and processing fair and as low as possible”, it said.

On its advantages, the global reinsurer said it is beneficial to the insured, business partners and even to the insurers.

For the insurer it said, “being protected without any hassle. Does it make more sense having to call your insurance agent and remaining unprotected until the policy is signed a few days later or becoming seamlessly protected in seconds without resharing data like name, address and payment details?

For the business partner, it said partners generate additional income when selling risk protection with their product or service. “The insurance coverage option can also increase the purchase rate, since the customer no longer has a loss risk. Insurers with embedded insurance technology (millisecond-fast APIs, messaging, computer vision, etc.) enable cost efficient operations for the business partner.

GCR Ratings (“GCR”) has assigned an initial national scale financial strength rating of A-_(NG) to Lasaco Assurance Plc, with a Stable Outlook.

Rating Rationale

The rating accorded to Lasaco Assurance Plc (“Lasaco”, “the insurer”) reflects the insurer’s moderately strong financial position, which partly offsets its limited competitive position in the highly fragmented Nigeria insurance industry.

Lasaco’s competitive profile somewhat constrains the rating. Lasaco is a mid-tier composite player within the Nigerian Insurance industry, with a track record of over four decades. The insurer controls an estimated market share and relative market share of 2.2% and 1.2x respectively as at FY20 based on total gross written premiums (“GWP”) of the industry. The premium base is somewhat concentrated, with group life business dominating premium mix over the review period with 60% contribution. This is somewhat offset by a diversified portfolio in the short-term business, with four lines of business contributing over 10% to the gross premium base. Going forward, the insurer’s competitive position is expected to be maintained within the same range, supported by entrenched market relationships with intermediaries and policyholders.

Earnings are at an intermediate level, with net profit supported by market sensitive income. In this regard, profitability in FY20 is underpinned by investment income and the highly volatile foreign exchange (“FX”) gains. Characterised by the low yield environment in 2020, largely due to the pandemic, investment income declined notably by 24.2% year on year (“YoY”) in FY20. This, coupled with an increase in net claims during the year, resulted to a moderation in operating margin. Looking ahead, given the strategic plans put in place, we expect planned premium growth to improve portfolio quality and support the volatile investment income, which in turn should result in earnings stability.

Lasaco’s capital adequacy is a positive rating factor. Though a slight 2.2% YoY decline in capital was reported at FY20 due to revaluation losses, capitalisation metrics remained strong. Both the international solvency and GCR capital adequacy ratio (“CAR”) were maintained well above 100% and 2.5x respectively over the review period, evidencing good loss absorbing capacity. The insurer plans to increase its shareholders’ funds by about N10bn over the medium term to enable participation on big policies, support business growth, and better position the insurer. This could be supportive to the rating should it be successfully implemented, with evidence of good capital management structures.

Liquidity is assessed within a relatively low range, given the fact that investment properties constitute about 22.5% of the investment portfolio at FY20 (FY19: 26%). That said, cash and stressed assets coverage of net technical liabilities registered a moderation to 1.3x at FY20 (FY19: 1.7x) due to cash absorption by reinsurance receivables. Similarly, operational cash coverage moderated to 10 months (FY19: 13.5 months), pressured by a spike in net claims incurred. Liquidity metrics are expected to improve over the near term based on the planned capital injection.

Outlook Statement

The Stable Outlook reflects GCR expectation that Lasaco will defend its competitive position as it deepens its relationship with the Lagos State, being the major shareholder. GCR expects the planned capital raise to improve the liquidity position over the next 12-18 months, while investment properties generate healthy returns for the insurer. we expect planned premium growth to improve portfolio quality, and support the volatile investment income, which in turn should result in earnings stability.

Rating Triggers

Positive rating action may stem from sustained improvement in earnings supporting a strengthening in liquidity and/or capitalisation. Conversely, a negative rating action could be triggered should investment property continue to dominate the investment portfolio without generating returns, with liquidity metrics moderating further. In addition, a sustained weakening in capitalisation and loss of market share would be negatively considered.