The Commissioner for Insurance Ghana, Justice Yaw Ofori, in this interview with Ebere Nwoji, believes that given the size of Nigeria’s insurance market, operators need as much as $50 million minimum capital base. Excerpts:
The wind of recapitalisation is blowing across African Insurance market. We learnt it is currently happening in Ghana, just like in Nigeria, as a regulator what is your experience like?
We expect that our regulated entities should be well capitalised to be able to deal with the risk that they bear. So basically that is what is obtainable now. But the revision of our minimum capital is not the only thing that we are doing now. We are looking at other things like risk-based supervision. Risk-based supervision does not mean you don’t need a minimum capital, but minimum capital should be there in addition to being risk-based. Now, the minimum capital we have, does not mean that, that is what you need. It is the minimum that we are looking for depending on the nature of the risk you are bearing. We believe that perception in insurance business is key. The perception now is that the insurance industry will not be able to pay claims. It kills our industry and we want to overcome that problem and minimum capital is one of the things we are looking at. As regulators, we have the core mandate of protecting policy holders secondly, to make sure that we have a very solid insurance sector.
But some have expressed concern about the timing and the duration that operators in Nigeria were given to actualise this, considering what happened in Ghana and the minimum capital requirement. What is your take on that?
I think at the end of the day, everything is expressed in dollar. Nigeria’s minimum capital requirement is higher than Ghana’s, but you should understand that Nigeria is bigger than Ghana. Nigeria is about five times bigger than Ghana and the economy is bigger. If you look at Africa, Nigeria has the largest population, a very strong market, I think it is about the third or fourth when it comes to insurance. So definitely, it is a big player. If you want to do business, you should be ready for the game.
So, I wouldn’t say that Nigerian regulator is not fair to operators. He did a good job. Nigeria is a big market so let’s not draw the comparison. Different markets, different strategy. I don’t know about the time frame given in Nigeria, but even in Ghana, the two years’ time frame we gave, people are still complaining that it is too short. But all you should know is that insurance business is such that no matter what you do, people will complain. But we as regulators, we want to give the right dosage. It is like a child suffering from malaria and the medication you need to give is chloroquine which is very bitter, but as a father or mother, you will insist the child takes the medication to recover. So, I believe the industry should not see the regulator as being anti-insurance growth. The regulator is ready to support the industry, but as I said before, as a regulator anything you do, you have to step on many people’s toes and they will not like it.
In dollar terms, how much is your current minimum capital requirement in Ghana?
Our capital value is about $10million for life and General business. Nigeria’s own is about $20million or more, but like I said, Nigeria is about five times the size of Ghana market. So if Ghana is $10million Nigeria’s minimum capital should have gone to about $50 milliin. We raised the capital from $3 million to $10 million
Does it cut across all business classes?
That is for life business, for reinsurance, it is bigger.
So, are the operators complaining?
You know we have been engaging them on the minimum capital for two years now so they were aware, but I never heard anything from them. They were aware but they did not know when it will come so I waited for them to come back from the AIO.
What is your assessment of the Nigerian National Insurance Conference?
This conference is great. This is my first time of attending it. I like the presenters I don’t know where they got them from, I mean the people in charge of the summit. The panel is good it is great when I go home I will engage most operators in Ghana to participate in such conferences. It is a good conference, but I wouldn’t replicate it in Ghana. I want a situation whereby if Nigeria is doing something, it should be different from what is done in Ghana, so that when it is done in Nigeria, Ghana will come and when it is done in Ghana, Nigeria will come. So I don’t want us to be doing the same thing. When we do the same thing, it doesn’t help growth. That is the problem we have in Africa, but we should allow people to specialise in various areas where they are good than replicating it. I believe there should be a strong relationship among the English-speaking West African countries especially Nigeria and Ghana. That is because without the two countries, the English speaking West African countries would be nowhere and I will expect Nigeria to play a major role.
So what is your takeaway from this conference?
Well, I will be looking at insuretech. I also like the topic disruption, innovation and growth. I had to listen keenly to the presenters to understand what they were talking about because my perception of disruption is negative, but anything that is new in the market is disruption. Like the minimum capital requirement, we are talking about, it is disruption, because it is disrupting the normal trend but that is the way to grow. So when it comes this way, you assess yourself and look at how to take advantage of the disruption and be innovative so as to grow. That is because there is always a need for a paradigm shift, you have to stop thinking the old way.
What is the major challenge for insurance in Ghana?
I think the major challenge is perception. The ability to pay claims and pay on time is one thing. We have to accept that there are some operators who don’t want to pay claims. They are not ready to pay claims and they find excuses. Yes, we have to accept that. Another challenge is technology. Insurance industry is so slow to adopt technology. They still like to do things the old way. But the technology is there. But they are not ready to form strategic partnerships. The presenters at this conference said if you form strategic alliances, success will be yours. When we talk about the recapitalisation there is need to come together and become stronger through co-existence. But the African ideology is to hold the company firmly as mine and continue making losses. Instead of teaming up and make 10 per cent you rather keep pumping money and making losses, just to stand up and say I own this company. That is the way we think in Africa.
What is the level of insurance penetration rate in Ghana?
Our penetration rate is between1.5 per cent to two per cent, but in terms of inclusive insurance, or access to insurance, bout 29 or 30 per cent of Ghanaians have insurance. We are next to South Africa because about 30 per cent of Ghanaians have one form of insurance cover in micro insurance, mobile insurance or whatever. Insurance Contribution to Ghana’s GDP is between 1.5 per cent to two per cent.