Risk management is the biggest concern of any business entity. The ability to move forward or to discontinue an activity depends mainly on managing risk. Insurance companies help businesses in dealing with threats of loss. The National Insurance Corporation of Eritrea (NICE) has been providing both life and non-life insurance in Eritrea.
NICE was established in April 1992 under a proclamation to establish the national insurance corporation of Eritrea. Prior to its establishment as NICE, the insurance company served as a Northern branch of the Ethiopian Insurance Corporation. Since 1992, various insurance plans that include general insurance (non-life) and life insurance have been introduced. NICE makes reinsurance arrangements to ensure its sustainability.
As part of extending its scope of activities, NICE has penetrated international markets and has connections with various reinsurers. For instance, it has connections with Munich Reinsurance Company of South Africa — the lead underwriter (lead reinsurer). Munich Re is now the biggest single reinsurance company in the world, which underwrites around 60 billion USD a year.
NICE has made investments, as a shareholder, in Lagos based Africa Reinsurance Corporation (Africa Re) founded by the African Union, Kenya based Zep Re (PTA Reinsurance Co.), which is founded by COMESA member states. It has also invested in New Sudan Reinsurance Company of South Sudan. Mr. Zeru Woldemichael, NICE’s chief executive officer, said that NICE plays a big role as a board member in both Africa Re and Zep Re while both the companies support NICE in terms of strategic alignment.
Reinsurance companies that NICE works with are Munich Reinsurance Co. (Munich Re), Africa Re, ZEP Re, Kenya Re, and East Africa Re. The company also works with a number of brokers such as J.B Boda in Mumbai, Jordans Global (Lagos), and CK RE as well as Afro Asian that are both based in London.
Since its establishment, NICE has been making impressive profit and continues to provide dividend to its shareholders every year.
NICE strives to extend its range of activities with the emerging mining industry in Eritrea. It has been dealing with mining insurance through various specialized brokers. Marsh is the biggest reinsurance broker in the world. Mr. Zeru said that they have been dealing with Marsh London, Marsh Canada and Marsh China in the placement of specialized mining risks.
Pointing out that potash mining, which is the biggest of its kind in Eritrea, is about to begin, Mr. Zeru said, NICE is negotiating on how to handle potash reinsurance. The company has already arranged a framework for the reinsurance of potash mining.
The primary mission of NICE is to provide a financial cover when any sort of loss arises. The risk NICE takes is within its capacity-with in its liquidity ability – and the Company must be able to pay when a claim comes. With the issue of aviation and mining insurance, which cover millions worth of property, NICE handles the risk by fostering connections with various worldwide reinsurance companies and insurance brokers.
As regards the current status of NICE, Mr. Zeru revealed that the company has been making reasonable profit since its establishment.
NICE was privatized in 2004 and a public offer of the shares was made by the Government of Eritrea. The shares were specifically sold to Eritrean nationals wherever they are and also to Eritrean institutions and companies. Currently the company has over 2000 shareholders. Around 56% of the shares belong to the Ministry of Finance while the 44% belongs to Eritrean individuals and corporate institutions within Eritrea.
NICE holds regular annual meetings of shareholder on the first Saturday of June. This year’s regular annual meeting of shareholders and the 3rd extraordinary meeting opens today 1st June 2019 and was attended by 400 shareholders and invited guests.
NICE has a plan to elect new board members on the first Saturday of June 2020. All activities of the Company have been carried out through internationally accepted governance. Succession plan is also among the major future tasks of the Company.
NICE has achieved impressive progress with its long serving management team. But Mr. Zeru said that the Company has failed to secure the succession plan on time, and they are now working on it to replace the long-serving management with a young workforce.
According to Mr. Zeru Eritrea has already been established as an international exam center for the Chartered Insurance Institute of London (CII). CII is one of the well respected and highly renowned chartered institutes in London which trains insurance personnel. Hence, NICE trains its staff to sit and to succeed in the exams provided by the Institute twice a year in April and October. “Our aim is to achieve a chartered insurer’s level for our young people and we will be achieving it in the next few years. The young employees are hopefully the ones to run this Company.” Mr. Zeru underlines.
As regards the achievement of the Company, Mr. Zeru said they have been making reasonable profit and the shareholders have been getting their dividend every year. The shareholders have been earning an average of around 8% of their investment. “Eight percent dividend comparatively with other institutions in other countries is a very reasonable amount,” Mr. Zeru added.
Pointing out that NICE has not been able to perpetrate into life insurance, Mr. Zeru said that to deal with this issue, in the last three years, they have introduced a group life insurance. The total number of the group needs to be at least 500. The benefits of such insurance schemes in a group form are that they will become members of the association while also getting life insurance without medical background. The terms for this type of insurance are much better and the premium is very reasonable.
We have assured the biggest 10,000 life insurance from the board of ex-fighters and we have also another 600 employees from the Ministry of Labor and Social Welfare. Negotiations are also underway with a number of associations and organizations to provide them with life insurance. So far, life insurance covers only one percent of the total share. Our aim, by the end of 2019, is to get between three to four percent of the total share and by the end of 2020 to have 10% of our sales from life insurance.
Almost in all developed countries the premium obtained from life insurance exceeds that of the general insurance. Around 75% of the premium comes from life insurance. “We have not yet penetrated into life insurance as envisaged but we are looking forward to go to that line,” Mr. Zeru noted.
In connection with the future plan of the Company Mr. Zeru affirms that medical insurance, life insurance and pension insurance are the three areas NICE envisions to penetrate and develop.
NICE has been making amendments to memorandum and articles of associations under the requirements of the commercial law and the recommendation of the Bank of Eritrea. Its first memorandum amendment was made when it was privatized in 2004. The memorandum of associations is amended periodically whenever there is a need.
At the 15th regular meeting of shareholders reports of directors and the management will be presented, the auditors will present their report and the shareholders will be asked for financial statement approval of the 2018. They will also decide on how to distribute the income — as dividend and as special and technical reserves. The shareholders will appoint auditors on their behalf and will also approve the financial statement of last year.
The prospect of peace in the East Africa region provides NICE more business opportunities. Mr. Zeru said that a lot of movement of goods in Assab and Massawa ports is expected which will extend the Company’s range of activities.
New Sudan Insurance Company in South Sudan, in which NICE is a shareholder and the manager, made impressive progress in 2018 and is even achieving better results in the first five months of this year. NICE expects reasonable dividend from the Company in the South Sudan. NICE also collects dividend from Africa Re and Zep Re. The Company is looking ahead to make more investment in Zep Re. “We are looking forward to have very good relationships with our Sudanese, Ethiopian and other insurance companies to secure mutually beneficial relationships,” Mr. Zeru elaborated.
Mr. Zeru underlines that though the Company has started agriculture insurance it has not yet developed as desired. Thus, the future plan is to extensively work on the development of agriculture insurance with the assistance of the Government in subsidizing some of the agriculture risks the Company is to take. The next five-year plan is to go to micro insurance. Infrastructure is the challenge NICE expects to have while penetrating deeper into micro insurance.
NICE has also invested in other sectors. It has a substantial share in Shemshemiya Commercial Farm (Gash Barka) and in Shishay Animal Feed Plant (Adi Segdo-Asmara). It manages the Pension Fund and Martyrs’ Fund of the Eritrean Government.
As a final remark Mr. Zeru said that NICE is the only insurance company in Eritrea and that is a disadvantage for the people and for the Company. If we had three or four insurance companies in the country, we would have compared ourselves with them to understand where we are. Comparing an insurance company with another from a different environment does not give reasonable comparative results. So, we are looking forward to seeing investment opportunities in Eritrea that would bring more insurance companies into the market. Once we have those companies, we will know whether our service is much better. This is what we have done in South Sudan. There are around 55 insurance companies in South Sudan and we are playing an extraordinary role. We are now among the top four insurance companies in the country. We are looking forward to having more players in the Eritrean market.