Windhoek-As a follow-up to a recent article on the functions of NamibRe, this article delves deeper into what it means in terms of the institution’s main objective to limit the outflow of capital from the country
It does this in the form of reinsurance premiums that allow the retention of capital for use in the country.
The earlier article explained that reinsurance is insurance for insurers. An insurer in Namibia will take out reinsurance cover to protect its assets from large loss events, such as a big hailstorm, flood or earthquake.
To obtain this reinsurance cover, a premium is paid by the insurer to the reinsurer. If that reinsurer is not in Namibia, then the premium paid will leave Namibia as an outflow of capital from our country to another in Africa, or even outside the African continent entirely.
The effect of that would be that the reinsurance premium paid by the Namibian insurance company, out of the insurance premiums that Namibians pay to this insurer, end up being paid to institutions outside the country.
That money is then not available for reinvestment into Namibia but ends up in the economy of the country that the premium is paid to.
So how does NamibRe help? The Namibia Financial Institutions Supervisory Authority (Namfisa) publishes regular statistics on the size of the various financial services in Namibia.
When looking at the data provided in the 2016 annual report issued by Namfisa, it is clear that the long-term insurance industry (life insurance) paid N$233 million in reinsurance premiums while the short-term insurance industry (house, car, boat, etc.) paid a further N$933 million.
This brings the total reinsurance premium paid by insurers in Namibia during 2016 to just over N$1.226 billion.
To put this amount in perspective, the new head office building for First National Bank of Namibia built in Independence Avenue in the capital cost about N$450 million.
The reinsurance premiums paid in 2016 would thus have been enough to build another two and half such buildings. The reported total premium received by the NamibRe during its 2016 financial year was a mere N$210 million.
To manage its risk, NamibRe also needs to buy reinsurance, however during its 2016 financial year it was able to retain 82 percent of the reinsurance premiums it received inside Namibia.
This means that of the N$210 million in reinsurance premium received by NamibRe, one hundred and seventy-two million Namibian dollars N$172 million remained in Namibia and was invested in the country. Without NamibRe, this amount would have flowed out of Namibia. In the context of our country, N$172 million is a great deal of money.
As a good corporate citizen, NamibRe makes a significant contribution to the Fiscus in the form of various taxes. The Corporation was started with an investment by government of N$20 million and it has never needed to go back to government to ask for more money.
The corporation also invests significantly in the education and development of Namibians in the various fields of knowledge that is needed in the complex environment of reinsurance.
In next week’s article on NamibRe, we will have a more in-depth look at the second objective of NamibRe: to develop insurance and reinsurance knowledge and skills in Namibia and to enhance the contribution of financial services to the economy of the country.