Windhoek-The Government of Namibia implemented the legislative scheme for the creation of the Namibia National Reinsurance Corporation to limit the outflow of capital from the country in the form of reinsurance premiums and allows that capital to be retained and used in the country. The secondary objective of the creation of the Namibia National Reinsurance Corporation (NamibRe) is to develop insurance and reinsurance knowledge and skills in Namibia, to enhance the contribution of financial services to the economy of the country.
Reinsurance is insurance for insurers. As such, reinsurance is the process of transferring risk from an insurance company to a reinsurance company by a reinsurance contract. An insurer will transfer risk to a reinsurer to protect its assets from large claim events. As such the availability of reinsurance is an essential component for the development of a healthy insurance industry.
In a developing country context, the volumes of insurance business may not justify the establishment of local private sector reinsurers and hence this hampers insurance market development. Although reinsurance is available on the international market, governments in jurisdictions where there is no local reinsurer do not benefit from any tax on the profits of such international reinsurance companies and suffer from foreign exchange outflow because of reinsurance premiums leaving the country.
Furthermore, reinsurance companies can play a vital role in the development of insurance products that are relevant to the particular jurisdiction in question, and offer reinsurance products to insurers that may not be available on the international market on reasonable terms.
Finally, reinsurers can play a key role in building local capacity to develop a thriving insurance industry. Within this context, many governments in developing countries have promulgated laws that govern the placement of reinsurance within their jurisdiction and have set up state-owned reinsurance companies. As an example, state-owned reinsurance companies are in place in Kenya, Tanzania, Ghana, and Uganda, with the Kenya Reinsurance Corporation being established in 1970. Similar entities in Tunisia and Ethiopia were formed jointly by the state, local banks and local insurers to retain capital in country. There is currently more than ten fully or partially state-owned reinsurance companies operating across Africa.
A question that quite often arises is whether the creation of such a state own reinsurance company is legal. The Act was the subject of a constitutional challenge by the insurance industry during 1999. The challenge failed, and the constitutionality of the Act and its objects was affirmed. Namibia Insurance Association v Government of the Republic of Namibia & Others 2001 NR 1 (HC).
As is clear across Africa, there is a definite need for fully or partially state owned reinsurance companies, to limit the dependence on foreign markets and consequently limit the flow of capital from our Country and Continent in the form of reinsurance premium.