The concept of re-insurance is a more risky business than the primary insurance; this is because the industry underwrites bigger risks.
Re-insurance companies are involved in insuring the insurance companies to enable them to write bigger risks of which with their own balance sheet they may not be able to write.
FMRE, a Zimbabwean-based re-insurance company with operations in Botswana and also underwriting business in 18 African countries, is one of those that are pursuing the risky business.
The company’s Managing Director, Ian Taonesa, said in an interview this week that the vision of his company is to be a dominant provider of re-insurance services in Africa. He fielded questions at a cocktail reception that his company hosted for various stakeholders.
“Currently, FMRE writes business in 18 African countries which highlight our market penetration rate,” Taonesa said.
Taonesa, an Insurance and Risk Management degree holder from National University of Science and Technology and MBA from the University of Zimbabwe, started FMRE in his home country in 2003 before Botswana operations were established in 2010.
He explained that his company writes business for all classes of short-term insurance, including agriculture insurance. FMRE in Botswana was registered in 2010 by Non-Bank Financial Institutions Regulatory Authority (NBFIRA) as a short term re-insurer.
“The objective was to provide underwriting capacity, talent development and product development,” he said.
He said FMRE has provided a number of training programmes in re-insurance and insurance in Botswana. The above, he said, underpins FMRE strategy to develop the market which is not much utilised in the country. Though still relatively new in local market, FMRE is enjoying support largely from all short term insurance companies registered in Botswana including the sub market.
Taonesa said when it comes to product development, FMRE boasts of its rich skills and its philosophy is that there is no bad or good risk and joked that it can only be the underwrite who is bad.
“This embraces one of our values as FMRE that we believe in innovation, creativity and entrepreneurship,” he said.
Taonesa said as the local economy grows it will also grow the company in leaps and bounds, which will make it one of the best re-insurer in the industry.
During the interview, Taonesa also gave reasons of what led them to establish their other operations here in Botswana.
“Botswana has a stable political environment which allows businesses to plan for the long-term, hence FMRE’s choice to set up in Botswana,” he said.
Part of the reasons, he said, was to increase the company’s geographical spread in the SADC region and also to diversify the sovereign risks from Zimbabwe.
The concept of reinsurance is not something common, most people know about the primary insurance, however re-insuring is also important.
“The importance of re-insurance is to enable clients to write bigger risks which their own balance sheet may not be able to write, therefore re-insurance is a form of rented balance sheet by the re-insurer to the insurance company for a premium,” Taonesa explained.
Furthermore he said re-insurance seeks to aid cash flows of the insurance companies in the event of a huge claim or series of claims occurring during a particular period of time.
Also the re-insurance reduces the outflow of the foreign currency from a domestic market to a foreign market by retaining risks which insurance companies would have reinsured in the external market where premium is paid in foreign currency. “It is like you are importing a service from outside,” he said.
While FMRE might be well established, particularly in Zimbabwe where it originates, the intention is to grow the company to incomparable proportions.
As strategy for growth, Taonesa said the FMRE management continues to encourage company shareholders by strengthening the company’s financial security through consolidating the balance sheet with the right form of capital.
This, he said, is because reinsurance is all about financial security, confidence and continuity. As the company, according to Taonesa, has demonstrated its ability to meet the obligations, the future is really promising for them with intentions to publicly list the company in stock exchanges which will also help raise funds for the company.