SPEECH

2003   IILA   ANNUAL  CONVENTION

INSURANCE & LOSS ADJUSTING IN AFRICA

BY

SAMMY  A. I.  SOTOMI   ACII FCIIN AILA

(President – Institute of Loss Adjusters of Nigeria)

(Chairman – Equity Trust Loss Adjusters)

Being an Address Delivered at the Breakfast Meeting of the

AUSTRALIAN INSURANCE LAW ASSOCIATION/

AUSTRALIAN INSTITUTE OF CHARTERED LOSS ADJUSTERS 

&

INTERNATIONAL INSTITUTE OF LOSS ADJUSTERS

On Tuesday  23  September, 2003  @  Adelaide, Australia.

Mr. Chairman of session, President of IILA, ladies and gentlemen, good morning.  It’s a great pleasure
and privilege for me to address this great gathering of Professionals  on the topic of INSURANCE & LOSS
ADJUSTING IN AFRICA.

My address is going to be very brief only on the practice and not on what is Insurance/Loss Adjusting, a twin
subject that I do believe that most of you are probably more vast and experienced than my humble self.

HISTORICAL BACKGROUND
The Insurance Companies in Africa evolved mainly from the Agencies of the major insurance companies in
Europe that were in existence in Africa Countries during the colonial era, which later metamorphosed into
full insurance companies such as Royal Exchange Assurance in Nigeria along with the National Insurance
Companies established by each African Country after independence. 

The National Insurance Companies in Africa are usually government agencies handlingmost of the government
accounts with the dual purposes of preventing capital flights in term of insurance premium and as a tool of
economic development.

Later, as the economy of the African countries continue to develop, indigenous insurance
companies were established as private companies limited by shares and those floated on
the stock exchanges as public liability companies. 

On the other hand, the growth and development of Loss Adjusting in Africa follows closely that of the
Insurance Companies as Service Providers for Insurers in the business of Claims handling, although the
practice of loss adjusting as presently known world over became prominently practiced and widely
accepted within the last two and half decades in Africa.

Loss Adjusting practice in Africa is still predominantly dominated by foreign Loss Adjusters from Europe
and North America who have established branches in some African Countries such as Cunningham Lindsey,
Mclarens Toplis, Crawford, & Gab Robins ( all having presence in S/Africa); and CCS Global with presence
in North Africa, Kenya, Uganda, Tanzania & S/Africa.

Some of the foreign Adjusters establish Correspondence and Associates in some African
countries where they do not have an establishment of a  branch of their operations. 

However, Nigeria and South Africa have in existence the largest number of trained and professionally
qualified indigenous Loss Adjusters in Africa with Nigeria having a total of thirty-three (33) registered
Loss Adjusting Firms.

Also, the practice of loss adjusting is more developed and well established in these two countries with
each having their Institute of Loss Adjusters (ILAN for Nigeria & ILASA for S/Africa) which are involved in
self regulations, formulation of code of practice & conduct and the protection and preservation of member
firms’ interests.

Requirement for establishment of Insurance Companies and Loss Adjusting Firms in Africa varies, but most
governments exercise some sort of control and regulations in the control of the business and most have in
existence legislations guiding the practice of the business with some governmental agencies acting as
Regulatory Authority such as National Insurance Commission (NAICOM) in Nigeria.

THE PRESENT

The present developmental stage of Insurance and Loss Adjusting in Africa in comparison to the rest of the
world could best be described by the following statistical table:

TABLE 1

The above data show clearly that Insurance/Loss Adjusting in Africa is still very much at its early
stage of development/growth but with a great potential.

At present, there are over three hundred (300) registered insurance companies in Africa with a
corresponding sixty (60) Loss Adjusting Firms (estimate), but the pattern of premium generation and
size of these companies is that the National Insurance companies of each of the Africa companies
produce averagely 25% of the total premium as they have a near monopoly of their governments’ accounts.

For example, although there are over one hundred and ten (110) registered Insurance companies in
Nigeria but 85% of the total premium income in the Nigerian insurance marketis generated by the
biggest ten of those companies. The same pattern goes for the Loss Adjusting Firms.

Furthermore, South African insurance market generate over 50% of the total premium income for the
Continent and having the largest and the most developed life assurance portfolio.

However, the major reasons identified for the low insurance premium income in Africa is due to the twin
problem of low capacity retention and inadequate technical know-how in the evaluation, assessment and
underwriting of the Oil, Gas, Energy and Aviation Risks.

For example, the main stay of the Nigerian economy is Petroleum Oil with it accounting for 95% of the
Foreign Exchange Earnings and 65% of the Budgetary Revenues of the Government, yet the insurance
of almost all risks associated with Oil is placed directly overseas through the National Insurance
Corporation of Nigeria (NICON) with minimal retention in the country.

Presently, the major Re-Insurers for the African market are Munich-Re and Swiss-Re, with both sharing
between them 90% of the business and having offices in South Africa and with Swiss-Re having an
additional office in Abidjan, Cote D’Ivoire to serve the West African market.

The following table is an example of premium income distribution of insurance companies in Nigeria.

TABLE 2.

GROSS PREMIUM INCOME OF INSURANCE COMPANIES IN (=N=000) NIGERIA BY CLASS OF BUSINESS
(1991 – 2000) AS PER THE NIA. 

SOURCE:  RETURNS MADE BY MEMBER COMPANIES TO THE NIGERIAN INSURANCE ASSOCIATION.

NOTES:

1.              All financial figures are in Naira and the exchange rate to US $1 is =N=120.

2.              The figures in parenthesis are in percentages and each represents the proportionate
share of that class in the total GPI for  the particular year.

3.              General Accident includes – Accident, Burglary, Workmen’s Compensation and
Miscellaneous Insurance business not else where classified.

TABLE 3.

PARTICULARS OF LARGE CLAIMS OF =N=1MILLION & ABOVE (2001).

The table below shows large claims of =N=500,000 each and above paid under various classes
of business

Between (1997 – 1998) and =N=1,000,000 and above paid in 1991 and 2001 as reported by some member
Companies.

Large claims of =N=1,000,000 each and above paid by some member companies in 2001 amounted to

=N=6,605,183,592 as against =N=2,743,424, 119 paid in 2000.

An analysis of large claims paid in 2001 showed that the first three highest single claims were paid by

NICON Insurance Corporation and included the following: =N=944,000,000 paid to N.N.P.C. 

On Fire, =N=696,301,008 paid to N.N.P.C on Damage to Crude Blow-Out at Orgho N0. 2 Well. 

An examination of the table below showed that most of the losses paid in 2001 were on fire policy.