...retaliatory actions begin

Private insurance companies in some African markets are unwilling to do business with Ghana’s state-owned insurance/reinsurance firms as a retaliatory response to government’s recent directive to Ministries, Departments and Agencies (MDAs) to do business with only wholly- or partially-owned state insurance companies in the country, B&FT has gathered.

Already, private insurance companies in Cameroon have expressed their misgivings about the directive and resolved to avoid doing business with Ghana Re --a state-owned reinsurer -- which has set up an office in that country.

Information available to the B&FT indicates that the directive has sent a wrong signal to private insurers in other markets as well, with insurers in those countries reconsidering their business dealings and treaties with any Ghana government-established insurance/reinsurance firm.

The reactions are seen as potentially damaging to the regional prospects of Ghana.

When contacted, the President of the Ghana Insurers Association Kwame Gazo Agbenyadzie described the directive as “illegal” and a dangerous omen, likely to strangle the fortunes of the industry and the local economy.

“The government directive is a very dangerous one as much as it is illegal. It’s also dangerous not only for the insurance industry but the national economy. We’ve gone past the point where MDAs had to do business with only state-owned firms...We think that everyone who believes in private sector enterprises should stand up to government on such a directive.

“Already, there are retaliatory actions underway which are affecting other state companies in the insurance business, especially in the Cameroon market, and it is not going to stop there,” he explained.

In December last year, government in a letter signed by the Executive Secretary to the President, Dr. Raymond Atuguba, directed all MDAs to with immediate effect purchase or renew any insurance cover required in the course of government business solely from insurance companies wholly or partially owned by the state.

The directive required any MDA that had cause to do business with a private insurance company to seek permission from the government.

It is understood that the directive is intended to especially boost the business fortunes of SIC Insurance and SIC Life.

Mr. Agbenyadzie explained that the directive has created uncertainties for firms in the insurance industry at a time some state-owned and private insurers from Ghana have entered into other markets on the continent.

“Some of the Ghanaian insurance firms are also moving into the Gambia, Sierra Leone and Liberian markets, and what will be the reaction (of the insuring public) there if our own government doesn’t want to do business with private insurers?

“So I think it sends a wrong signal,” he added.

Currently, there are 43 companies in both the life and non-life insurance sectors which are all competing in a market where insurance penetration is less than two percent.

Mr. Agbenyadzie said the monopoly created by PNDC law 227 -- which required all government agencies, statutory bodies or corporations in which the government owned more than 50 percent interest to be insured with the SIC -- had been scrapped following passage of the Insurance Act 2006.

He said attempts to create a monopolistic situation for a particular company should be resisted and condemned.

“The Insurance Act of 2006 has repealed the provision in the law that mandated MDAs to do business with only state-owned firms.

“So this directive should be condemned by anybody -- whether the person is in insurance or not -- because if we allow government to have its way and undermine provisions in the statutes, then we will not know what can happen again,” he said.

He said the insurers, through the GIA, have already made their concerns known to the government and are awaiting a response, adding: “It is one of the things that when government is ill-advised, it tends to do. We at the GIA think that the directive is completely wrong and must be reversed.”

A financial consultant, Dr. Daniel Seddoh, also described the directive as wrong despite acknowledging that it is meant to address the business and financial challenges of state-owned insurance companies.

He said government must instead resource the companies adequately to improve their capacities to solicit and pitch for business on a competitive basis.

“We have moved away from the socialist mindset to create a free economy, and yet are restricting ourselves with things like this...If the state companies are that good, they will not need anyone to push business to them. So we must equip them with the best of human resources and naturally people will go there. But to give directives sends wrong signals.”