For what’s classed as an emerging economy, South Africa has one of the most sophisticated financial services sectors in its bloc.
Foreign interest in the South African short-term insurance market, especially the corporate sector, is very active. Chicago-based Aon Corporation bought a stake in local brokerage Lumleys more than a decade ago, the Willis Group took a stake in Mark Floyd and Associates, as did Marsh in CT Bowring.
Most recently, a private equity consortium headed by a foreign operator bought Alexander Forbes and ACE, one of the largest United States corporate insurers, opened offices in South Africa during 2006. The old SA Eagle has been renamed Zurich Insurance Company in what seems to be an increasingly close strategic involvement by the Swiss parent.
Among the large brokerages, that leaves Glenrand MIB as the only independent, South African-owned corporate insurance broker. Yet it too has a defence against global competitors as it can access international markets and global best practice via its exclusive arrangement with Jardine Lloyd Thompson, the world’s sixth largest insurance and risk adviser.
Many of the foreign entrants came to South Africa to support multiÂnational clients that had entered Africa. The trend is for them to build up their South African book and make selective local acquisitions, extending regional programmes for those large South African clients that they pick up, using their geographical footprint in Africa.
So it is with ACE Insurance, which already has two operations in Africa, in Nigeria and Egypt.
ACE CEO Mike Durek says the company has 57 country organisations and issues paper in more than 140 territories.
“We have more than 220 multinational Âclients that we were unable to service in Africa. Our strategy in opening offices in South Africa was therefore to service these clients throughout Africa, and at the same time to establish a physical African footprint with South Africa as the hub. We have a five-year plan in place to grow our business in select niches to place ourselves in the top 10 insurers from a premium income perspective,” says Durek.
It will not compete head-on with major players such as Mutual & Federal, Santam, Zurich or Auto & General, but intends to focus on two areas: the assets and liabilities of large corporates and accident and health.
“We’ll focus on our global strength, bringing innovation, expertise, global products and services, and our world-class technology to this country. South Africa is an attractive market to enter and Africa is a sexy continent right now with all the challenges it presents. The strong Chinese and Indian interest in Southern Africa demonstrates that,” he says.
“Providing products to emerging markets in South Africa and into other markets is a fantastic Âchallenge.
The key is how to distribute products — what works in the cities does not work in remote rural areas.”
With all the challenges of Africa, says Durek, organic growth in South Africa will remain the challenge for now, potentially augmented by acquisitions when the opportunity arises.
“We could, for instance, end up acquiring a life business to complement our accident and health business, which then will allow us, among other offerings, to sell funeral cover,” says Durek.