Writer Ian Armitage
Project manager Eleanor Watson
AON Benfield is the global reinsurance intermediary and capital advisor of worldwide insurance, reinsurance and risk management specialist AON plc. Basically, it provides balance sheet protection to insurance and reinsurance companies.
Why do insurance companies need reinsurance? Well, there are a couple of reasons: first and foremost is access to capital and protection of the balance sheet. Think of catastrophic events like Hurricane Sandy or the Christchurch earthquake – without a fail-safe protection, events like this could bankrupt an insurer or reinsurer if they have not purchased the appropriate reinsurance covers.
With this in mind, you can see why companies like AON Benfield play an incredibly important role in offering access to reinsurance products and markets, as well as, providing critical actuarial analysis in the form of capital and catastrophe modelling, enabling firms to identify optimal reinsurance structures relative to their risk appetite and capital requirements.
AON Benfield’s Africa hub is based in Johannesburg. From this location it services 15 African countries in sub-Saharan Africa, offering “specialist expertise” to local insurers and reinsurers around the continent.
Its presence and reach has allowed AON Benfield to position itself as a market leader.
“Reinsurers constantly seek to diversify their books on geographical and regional grounds,” Paul Griessel, Executive Head of SA Treaty, at AON Benfield says. “This is a great time to be involved in Africa as a territory as the demand for insurance and reinsurance continues to grow. Africa has been the second-fastest growing economy in the world, with GDP increasing on an average of five percent a year. The middle class ranks are starting to swell, driving demand for goods and services. Demand for insurance products, new or otherwise, should follow. Our Africa team itself has a substantial market share in Southern, Eastern and West Africa; they do this independently with the local insurers, and source the reinsurance on behalf of these local insurers in both local and international markets. Obviously growth in the economy filters through into the insurance and reinsurance market.”
South African insurers are pro-actively expanding into the rest of Africa says Griessel. “They are and where the potential opportunity exists is to piggyback on their expansion. Many of these insurers are existing clients of ours, and this creates an opportunity to grow with them.
“There is also growth potential in facultative reinsurance,” he adds, “especially in the construction sector – the building of dams, roads, and government infrastructure.” There is a lot of potential for the facultative brokers to access these risks and place them into the South African market where South African insurers and reinsurers participate on this business in the reinsurer role, Griessel says. “I think the South African market is probably a little more competitive because they are closer to, and understand the risks better than reinsurers based in London or Europe. Rating agencies are also awarding stronger ratings to some African reinsurance providers, and this encourages the business to remain on the continent.”
Firms like AON Benfield enable African insurers to offer a “wider range” of insurance products. “In the African context particularly, we enable insurers to offer packages they wouldn’t otherwise be able to. The product and underwriting knowledge of certain classes of insurance may not be prevalent in specific markets, and here we assist with product development and then arrange the appropriate reinsurance for the company behind the product or product line, e.g., Professional Indemnity classes or Contractors and Engineering classes. “In certain circumstances, some markets are extremely well developed, and it would not be fair to say African insurance markets – South Africa excluded – are in their infancy”, Griessel continues. “In fact, some African markets are extremely well developed and some of them are ahead of South Africa in certain areas and technologies.
“There are insurance companies in Kenya that are selling insurance by cellphone at the moment which doesn’t really happen in South Africa. There is a lot of innovation elsewhere.
“The problem with their markets is penetration – getting to the man on the street and convincing him to buy insurance. It is not the case that they don’t have the expertise or skills. Like any country, there will always be gaps in product offering and knowledge between different markets and that is really where we are trying to get in and provide the intellectual capital and possibly a South African partner to develop where gaps may be identified.
“It’s what our South African insurers are also trying to do; developing different ideas and products and identifying different distribution channels to access the majority of the population.”
What’s behind AON Benfield’s success? “A number of things,” says Griessel. “We believe insurance and reinsurance is about people. We believe we employ high quality people, both in South Africa and in our dedicated African team in London and have a quality product offering.
“Our local catastrophe modelling also sets us apart from any other catastrophe modelling capability available in the South African market, as does our analytics capability. Our people travel regularly to meet the clients, and provide ongoing support. We deliver a service that clients are willing to compensate us for. We ensure that we maintain regular contact with our clients and do not gea reputation of “Renewal Brokers”. Clients want you to be in and around their business, to be there to bounce off ideas, look for solutions to issues that may raise their heads during the year, and look at new product development etc. I think that with our knowledgeable and experienced people that are known throughout and active in the markets in which we trade, we deliver that.”
AON Benfield South Africa has a very diverse team which helps in operating in the different markets on a local level.
“We have very diverse team – people from the U.S., UK, Zimbabwe, Nigeria and Kenya that all work within our teams. These are people that are known on the ground in the different territories and bring different knowledge and experience to the party; it is a huge strength for us. There is nothing better than a Kenyan being able to talk to a Kenyan, even if he is working in a South African subsidiary of a global firm, being able to access global capabilities. It makes a big difference at a number of levels – different cultures, languages and business practices are understood, and can be communicated to potential partners. Also, the guys like travelling to meet clients because it is their home country and they are happy to go there and actually spend quality time with the client in their home country. I think that is important.”
To learn more visit www.aonbenfield.com.