The Insurance Sector In Mauritius Finance Essay

Harmonizing to the Insurers Association of Mauritius, there are 16 members that operate in both Life and General concerns, that is composite companies, two members transact general insurance concern merely ( i.e. motor and non-motor ) , and two others life insurance merely ( long term concern ) and three local representatives of abroad reinsurance companies are besides members of the association. The entire figure of insurance companies registered under the Insurance Act soon stands at 19, of which 8 are foreign insurance companies represented locally. The insurance companies are tightly controlled by the Financial Services Commission ( FSC ) , who regulates and oversee the industry.

Over the old ages, with the singular development in Mauritius, the insurance industry succeeded in maintaining gait with the demands of the market. Soon, the industry offers a broad scope of insurance merchandises available on the market classified under motor, Marine, fire, family, personal accident, travel, wellness, liability, technology, casualty, life and pension among many other insurance advanced merchandises to function the market. In Mauritius, the insurance sector is extremely concentrated ; the three largest groups have 76 % of entire assets. Despite being the high degree of concentration, the insurance industry is extremely competitory and runing with high efficiency and high profitableness.

Insurance Companies in Mauritius:

CIM Insurance Ltd

CIM Life Ltd

The Anglo-Mauritius Assurance Society Ltd

BAI Co Ltd

Phoenix Insurance ( Mauritius ) Ltd

GFA Insurance Ltd

Indian Ocean General Assurance Ltd

Island General Assurance Co Ltd

Island Life Assurance Co Ltd

Jubilee Insurance ( Mauritius ) Ltd

La Prudence ( Mauricienne ) Assurances Ltee

LAMCO International Insurance Limited

Life Insurance Corporation of India

Mauritanian Eagle Insurance Company Ltd

Mauritius Union Assurance Company Ltd

The New India Assurance Company Limited

State Insurance Company of Mauritius Ltd

Sun Insurance Company Limited

Swan Insurance Company Ltd

3.1.2 Insurance Agents

Insurance agents form an active portion in the Mauritanian Insurance sector as they represent about 30 % of the industry in footings of clients. They are professionals who assess hazard on behalf of their clients, advise on the extenuation of hazards, place which type of insurance policy from which insurance company will break suit the demands of the clients and pull off client portfolios good harmonizing to the hazard they want to see. Agents have been extremely involved in interrupting down the traditional construction of the insurance market under which the arrangement of hazards was dictated by the shareholdings that the major economic involvements in Mauritius have in the assorted insurance companies. This resulted in a more flexible placing of hazards with crystalline tendering of official concern.

The insurance agents registered in Mauritius are:

A I Brokers & A ; Advisers Ltd

ADG Brokers Limited

Britam Ltd

Agents Plus Ltd

Chartered Brokers Ltd

City Brokers Ltd

Ebrokers Ltd

Geric Brokers Limited

Global Cover Ltd

Gras Savoye Brokers And Consultants Limited

Guy Leroux Brokers Ltd

Headlines Ltd

INRE Management Services Ltd

INXS Ltd

London Brokers Ltd

Medibroker Ltd

MIB Ltd

NYC Specialist Brokers Ltd

Reinsurance Solutions ( Mauritius ) Ltd

Palaos Ltd

PriceGard Management Limited

3.2 Insurance Legislation

In 2001 the Mauritanian parliament enacted the Financial Services Development Act 2001, the most of import proviso of which, from the point of position of the insurance industry was the puting up of the Financial Services Commission ( FSC ) to oversee all non-banking fiscal concerns, including domestic and seaward Insurance statute law started with the Insurance Act 2005, somewhat amended by the Insurance Amendment Act 2007, which came into force on 28th September 2007. It was accompanied, on the same twenty-four hours by the Financial Services Act 2007, which affects planetary ( offshore ) concerns, such as any confined insurance companies registered in Mauritius, and the Securities Act 2005 ( with 2007 amendments ) , which affects the investing constituents of insurance companies ‘ concerns.

Together with the Financial Services Act 2007 and the Securities Act 2005, as amended by the Securities ( Amendment ) Act 2007, this statute law is intended to supply a amalgamate licensing and supervisory model for fiscal services other than banking. The most of import alterations brought in by the new statute law are:

Separation of long-run and short-run concern, so that concerns wishing to carry on both types of concern may merely make so in separate companies

Strengthening criterions refering both support and capital demands of insurance companies. The proposed demands will be based on each company ‘s ain hazard profile, efficaciously risk-based capital.

Restriction of control ( cresting ) , which will intend that no individual will be allowed to keep a figure of portions sufficient to do him/her “ important ” stockholder without blessing from the regulator

Strengthening of corporate administration, including demands that insurance companies have audit commissions which include members independent of the company ‘s board of managers ; besides the functions of statisticians and hearers is to be strengthened

Reviewing statutory returns to do it possible to place inauspicious alterations in an insurance company ‘s economic wellness every bit early as possible

Increasing consumer protection and giving the committee increased powers to coerce companies to discontinue “ unwanted patterns ” , every bit good as over affairs such as weaving up, transportation and merger of insurance concerns.

Widening control to insurance agents, including a demand to keep a separate history for insurance premiums collected.

3.3 Types of License

Under the new statute law companies will hold to specialize in either general concern or long-run concern. Existing composite companies were required to divide up by the effectual day of the month of the 1st January 2011 on which the new insurance act is amended to necessitate a separation of long-run and general concern.

Applications for a license must include the categories which the applier intends to see.

The general concern categories are: 2010

Accident and wellness

Engineering

Guarantee ( surety )

Liability

Assorted

Motor

Property

Transportation system

The long-run concern categories are:

Life insurance concern

Pension concern

Permanent wellness insurance concern

Linked long-run insurance concern.

The insurance statute law was followed by:

Insurance ( Long Term Insurance Business Solvency ) Rules 2007

Insurance ( General Insurance Business Solvency ) Rules 2007

Insurance ( Statutory Reinsurer ) Rules 2007

Insurance ( Returns ) Rules 2007

Insurance ( Returns ) Rules 2007 – First Schedule ( 1 )

Insurance ( Returns ) Rules 2007 – First Schedule ( 2 )

Insurance ( Returns ) Rules 2007 – Second Agenda

Insurance ( Insurance Brokers ) Rules 2008

3.4 The Mauritius Union Corporate Profile

3.4.1 Company ‘s Mission

The vision of Mauritius Union Group is to be recognised as a leader in the insurance sector and insurance related activities, supplying superior fiscal protection and investing services with unity, trust and professionalism.

3.4.2 Company ‘s Valuess

The company ‘s nucleus values are summarised in 3S which are strength, security and service. The Mauritius Union has built its strength on its 63 old ages history, resources, repute and competences to infinitely develop advanced merchandises that focus on people ‘s altering insurance demands in life.

3.4.3 The Mauritius Union Group

The Mauritius Union Group is one of the largest insurance groups in Mauritius. With conformity to the insurance act 2007, the group operates in the General insurance concern through The Mauritius Union Assurance Company and La Prudence Mauricienne Assurances Ltee for Life insurance ( long term concern ) . The group besides holds two wholly-owned subordinates, the National Mutual Fund Ltd ( NMF ) , and Feber Associates. The group is financially stronger with the taking over of La Prudence Mauricienne Ltee with different bunchs such as underwriting, claims, logistics, investing, loans, selling, finance, client attention, human resources and IT to back up the operational activities of the group for a sum of approximately 500 employees.

3.4.3.1 The Companies

The Mauritius Union Assurance Company Limited which was incorporated in 1948 is the oldest composite insurance company in Mauritius. The company is a public limited company which portions are listed on the stock exchange of Mauritius under the abbreviation MUA since the 14th December 1993. Since January 2011, the company is now knowned as Mauritius Union General Insurance to follow with the insurance act 2007 to go portion of the Mauritius Union Group. The company offers a broad scope of general insurance merchandises for both persons and corporate such as motor insurance for motor vehicles, non-motor insurance like family comprehensive for homeowners, fire and allied Perils for commercial edifices, travel insurance, Marine insurance, medical insurance, golf insurance, domestic contraptions insurance, managers and officer ‘s liability, professional insurance among many other merchandises. Since the return over of La Prudence Mauricienne Ltee, the company is the market leader in general insurance concern in Mauritius.

La Prudence Life Insurance

With the application of the insurance act 2007 and the pickings over of Prudence Mauricienne Ltee by Mauritius Union, the company is now traded under the name La Prudence Life Insurance to supply a broad scope of Life & A ; Pension merchandises. Since January 2011, the company is the amalgamation between Mauritius Union life section and La Prudence life section to supply wide-ranging life insurance and pension expertness. The merchandises offered by the company are life confidence, pension program, instruction program, investing program, long-run loans and specialise in funding of belongings development undertakings through the MU Property Gold squad with the coaction of major existent estate bureaus.

The National Mutual Fund

The National Mutual Fund Ltd ( NMF ) was established in 1990 as a joint venture between local private insurance companies and parastatal organic structures to promote nest eggs among the Mauritanian population. The company is the innovator in Unit Trust investing in Mauritius, and offers local investors an chance to entree a broad scope of conventional plus categories through its two particular unit trusts which are the NMF General Fund and the NMF Property Trust, to assist investors to construct wealth. The company was one of the first major return over of Mauritius Union in 2010 with the acquisition of 95.71 % of issued portion capital.

Feber Associates

Feber Associates, the first professional pension fund direction company apparatus in Mauritius was established in 1985. The company was founded by La Prudence Mauricienne Ltee laminitis Felix Maurel and Bernard Mayer, a member of board of La Prudence at that clip, the name Feber is a mix up of Felix and Bernard names. The company was a entirely owned subordinate of La Prudence Mauricienne and since the return over of the company by Mauritius Union ; the company is now a subordinate of the Mauritius Union Group. The company provides valuable penetration on all the complex facets of pension programs by helping in the execution and direction of pension financess for little, medium and big endeavors and the direction of investings.

3.5 Risk Management at Mauritius Union

3.5.1 MUA Audit & A ; Risk Committee

At Mauritius Union, hazard determinations are taken by the Audit and Risk Committee which is composed of the board members, internal and external hearers, and the direction of the company. The duty of the audit and hazards commission is to plan an appropriate hazard appraisal methodological analysis every bit good as organizing companywide hazard direction enterprises ( Rejda, 2005 ) . The commission has besides to guarantee that proper systems are designed to pull off instead than extinguish hazard of failure to gain concern aims.

A hazard direction model has been implemented at MUA to beef up control and to:

Ensure all material hazards are identified and reported to direction, to the board of managers and to the audit and hazards commission

Ensure extenuation activities are developed, communicated, agreed and measured to guarantee aims are achieved

Ensure uninterrupted designation of new hazards that may originate so as to implement mitigating controls

3.5.2 Eventualities

Any system or administration has assets of value worth protecting. These assets have certain exposures arising from internal and external menaces. Hazard arises as a consequence of chance, capableness and/or motive to work these exposures in order to do loss, calamity or unwanted result ( Niehaus, 1999 ) .

To guarantee complete coverage and effectual direction of hazards that MUA face, direction in coaction with the hazard direction commission shall proactively supervise events and tendencies to place exposures and reference end point hazards.

3.6 Risk Profile

The administration ‘s hazard profile represents the identified-key hazard countries. Management shall on the footing of identified hazard countries determine specific hazards per section and for the administration as a whole ( Dorfman, 2002 ) . This exercising shall be performed one time early and shall move as a trigger for execution of appropriate extenuation schemes. Areas of focal point shall be MUA ‘s hazard tolerance, ability and capacity to extenuate and larning demands i.e. hazard direction through active and preventative steps.

MUA Risk Management

At MUA, hazard direction refers to “ the procedure used by the Company to supervise and extenuate its exposure to hazard ” . The intent of hazard direction is non to extinguish hazard in general, but to cut down it to an acceptable degree in regard to the aims of the company.

In the insurance sector, successful direction fundamentally means commanding hazards in order to protect the fiscal strength of the company and increase its value on a uninterrupted footing. It is the purpose of MUA to aline the hazard direction model of the company to outdo patterns.

Risk appraisal activities are carried out by the internal hearers following which, direction of MUA and the internal hearers have been working in coaction to finalize the risk-monitoring model. The hazard direction model will be continuously reviewed and updated to reflect the on-going hazards confronting the company at any point in clip.

In order to set up criterions of hazard direction, MUA has set clear parametric quantities for insurance categories, reinsurance protection, keeping bounds, and other appropriate steps. A Risk Management procedure was designed and implemented to understate the impact of identified hazards which have been categorised as follows:

3.7.1 Insurance Hazards

The chief activities of MUA are concerned with the pricing, credence and direction of hazards from clients. This means the credence of hazard under an insurance contract for a premium paid, and a policyholder is compensated for fiscal loss suffered as a consequence of a specified unanticipated future event, or of a certain hereafter event where the timing of the happening is unsure. Hazards are chiefly associated with the MUA ‘s underwriting, reinsurance and claims managing activities. The chief hazard that MUA faces under its insurance understandings is that the existent claims and benefit payments exceed the transporting sum of the insurance liabilities, which may happen if the badness or frequence of claims and benefits are greater than estimated. In this position, the direction of underwriting and claims uses several tools to compose certain hazard categories of concern, reappraisal public presentation and direction of portfolios within the group. It is besides ensured that an equal premium is charged to the client to be able to prolong the claims made. Factors that worsen hazard include deficiency of hazard variegation in footings of type and sum of hazard, and accretion of hazard and type of industry covered.

3.7.2 General Insurance ( Short Term insurance )

The frequence and badness of claims can be influenced by several factors and the hazard under any insurance contract the likeliness that the insured event occurs and the uncertainness of the sum of the ensuing claim ( Dorfman, 2002 ) . As by nature of an insurance contract, hazard is inadvertent, unexpected and can non be predicted, this is why MUA ‘s underwriting scheme attempt to guarantee that the underwritten hazards are acceptable, good priced and diversified in type, sum of hazard and industry. This means that MUA ‘s underwriting is to diversify the type of insurance hazards that are being accepted and among each of these classs to accomplish a sufficiently big population of hazards to cut down the incompatibility of the expected result. In this position, past tendency of claims statistics are analysed to be used to measure and reexamine hazards public presentation of single policies.

Claims managing is closely monitored by the company to guarantee that the loss reported is covered and decently assessed. The most of import claims result from accident, fire and hazards, and their effect, and liability claims granted by the tribunal. MUA ensures that claims commissariats are determined utilizing the best information available of claims colony forms, forecast rising prices and colony of claims. Claims appraisal techniques besides engage obtaining collateral grounds from as broad a scope of beginnings as possible and uniting these to organize the best overall estimations. MUA has the right to enforce deductibles ( surplus ) and has the right to reject deceitful claims.

The extent of hazards retainable and transportations, through reinsurance which is done through Guy Carpenter insurance agent, hazards in surplus of its capacity are determined by the company.MUA ‘s reinsurance agreements include relative, extra of loss, calamity and facultative reinsurance screen so that the maximal loss that the company may meet is predetermined in ay one twelvemonth.

3.7.3 Life Insurance ( Long term Insurance )

Refering long term insurance contracts linked to life insurance, the insured event is decease which is a certainty but there are some major insurance factors that may impact on insurance claims are diseases like diabetes, high blood force per unit area, bosom jobs, HIV/AIDS and general alterations of life style, such as feeding, deficiency of exercising, and smoking wonts ensuing earlier or more than expected claims being submitted to the Company. Factors like continued betterment in medical scientific discipline and societal conditions that would increase length of service will impact on contracts where endurance is the insured hazard.

MUA manage life insurance through its reinsurance agreements and subventioning scheme which ensures that hazards underwritten are good diversified and in footings of degree of insured benefits and type of hazards. Underwriting includes the application of an appropriate actuarially determined premium that reflects the wellness status and household medical history of an applier. Death screen above a pre-determined keeping bound is reinsured on any individual life insured and liabilities in footings of long-run insurance contracts are based on actuarial ratings.

3.7.4 Operational Hazards

At MUA operational hazard is defined as “ hazards of loss ensuing from inadequate or failed internal procedures and processs, human mistake or system failure or from external events. ” The Company has established a proper operational policies and processs to guarantee that functions, duties and answerabilities of each employee are clearly set and the illustration is set by the board of managers which adhere to the highest criterion of behaviour, moralss, transparence, conformity with statutory duty and best patterns in all concern minutess. Operational loss events have major negative impact on the market value of insurance companies. These losingss may be caused by one or more of the followers:

3.7.5 Human Resources Hazard

The major human resources hazard of MUA is that the caput of sections, directors and supervisors for pull offing and commanding different sectors of the company or a concern procedure do non possess the necessary accomplishments, experience and cognition needed to guarantee that critical concern aims are achieved and important concern hazards are reduced to an acceptable degree. To rectify to this state of affairs, internal preparation and external programme are on a regular basis organised to understate that hazard. There may besides be losingss originating from Acts of the Apostless inconsistent with wellness and safety Torahs, unemployment, personal hurt claims among others.

3.7.6 Conformity Hazard

Conformity hazard besides known as non-conformance hazard is the hazard of confronting legal duty, supervisory penalty, fiscal losingss or repute loss as a consequence of an incompliant relation, behavior and/or act of skip or committee made by the company or any of its employees or salesmen ( Merna and Al-Thani, 2010 ) . The insurance sector is closely monitored by a statutory regulator which is the FSC and MUA has to guarantee that procedures and processs are good done in conformity to conformity processs. Non-conformance gives rise to lower quality, higher costs, lost grosss, unneeded holds, service failure hazard because if non identified and corrected before a service is delivered to the client, the result can be public presentation failure. At MUA a conformity section lead by Mrs Macha Uppiah has been setup to supervise closely these issues and study to the direction and board of managers.

3.7.7 Information Technology Risks

Information engineering hazards can be, system development and substructure issue, choping jobs, virus, spyware and malware spread, computing machine package and hardware failures and are non runing as intended, and can compromise the unity and dependability of informations and information ( Laudon and Laudon, 2002 ) . Information engineering hazards are exposing important assets which are the company ‘s database and information to possible loss or abuse, or are exposing MUA ‘s ability to keep a high criterion of its chief concern procedures. To pull off these hazards, the Information System section lead by Mr Rishi Sewnundun has set up a proper catastrophe recovery program of the informations, proper networking installations, and trusted firewall and antivirus to forestall the leaking of information. The insurance bundles used is audited by IS hearers to measure the possible hazard of down clip, stealing of information and the unity of the system.

3.7.8 Health and Safety Risk

Employees ‘ public assistance and safety is of import for MUA because if non decently controlled can expose the company to significant liability in regard of workers ‘ compensation. The Human resources section ensures that the company are conformity with the labor Torahs and the occupational safety and wellness disposal Torahs in topographic point, as non-compliance may ensue in heavy mulcts. The company as stipulated by the Torahs employ a wellness and safety officer to guarantee the security and good being of all employees. The company besides have a wellness and safety commission which function is to guarantee that wellness and safety hazards are minimised through control, follow-up, communicating processs, consciousness plans and preparation.

3.7.9 Product/Service Failure Hazard

There may be a hazard that during insurance operations clients receive faulty insurance policies, contracts, incorrect and deceptive information or improper service ( CII ) . The consequence of these failures would be client ailments, litigated claims, off policies, increased claim frequence or badness. All these can impact the repute, profitableness, future concern written, credibleness and market portion of MUA. As per FSC ordinances, a Customer Care section which is managed by Mrs Christel Ladegourdie, handles the client ailments and seek to happen solutions to clients jobs.

3.7.10 Business Interruption Risk

MUA ‘s ability to transport on of import operations and procedures is highly dependent on handiness of skilled labor, information engineerings and other resources. The company would hold great trouble to go on operations if people with the needed experience and accomplishments to execute occupations within the administration or other critical resources were unavailable or if critical systems broke down such as the company ‘s networking or insurance system. A concern break program has been created affecting the duplicate of MUA ‘s records and information systems on standby waiters at a distant location, and insurance minutess are updated day-to-day, through the Mauritius Telecom frame relay web.

For operational hazards correct evaluation methods based on the repeating nature of the hazard and the fiscal and operational impact of the hazard are applied. Under the hazard direction model that has been established for MUA, a precedence action program aimed at developing and implementing mitigating controls has been prepared. Clear duties and marks have been established and are closely monitored

3.7.11 Fiscal Hazards

MUA is exposed to fiscal hazards through its fiscal assets, fiscal liabilities, reinsurance assets and liabilities. The major hazard is that net incomes from fiscal assets are non plenty to finance the duty coming from insurance and investing contracts ( Rejda, 2005 ) . MUA manage and supervise the fiscal hazard related to the operations through internal control processs and written policies.

3.7.11.1 Currency hazard

The currency risks that can impact MUA are the purchase reinsurance contracts in foreign currency, equity investings, bank balances, belongings investings and foreign investings whose net assets are exposed to currency fluctuations. The chief exposures are in regard the US Dollar, Euro and UK Pound.

3.7.11.2 Liquidity hazard

This means that MUA should hold sufficient hard currency and marketable securities to run into duties when they fall due. Liquidity hazard is considered as really low since MUA has a strong liquidness place.

3.7.11.3 Credit hazard

Recognition hazards are chiefly to cover with debitors for insurance premiums and to secured loans granted in the normal class of concern. The debitors section closely monitor footings of payment given, payment processs, delinquent balances, and debt recovery actions by directing “ mise en demeure ” . Lend given are approved and monitored by the Credit Committee which is chaired by the Managing Director.

3.8 Market hazard

Market hazard is the hazard of day-to-day fluctuation in that the market value of equity securities portfolio of MUA. Market hazard is actively monitored by the investing commission which ensures that investings are sufficiently diversified in order to fit assets and liabilities and liquidness demands. Market hazard is besides managed actively to extenuate awaited unfavorable market motions.

3.9 Reinsurers ‘ default

MUA is exposed to the possibility of non-payment by its reinsurers for their portion of insurance liabilities and refunds in regard of claims already paid. The direction proctors with Guy Carpenter the company ‘s reinsurance agent the fiscal strength of its reinsurers with which reinsurance is purchased. Guy Carpenter ensures that MUA hazards are merely given to top-rated and credit-worthy reinsurers like Munch-Re and Swiss-Re.

3.10 Environment and Strategy hazards

Environment and Strategy hazards occurs when there are environmental forces that could significantly alter the basicss that drive the MUA ‘s overall aims and schemes or set the company out of concern. These hazards may come from failure to respond or expect to rivals ‘ actions on the market, over dependance on providers, altering form in the industry, failure to understand client demands and develop new merchandises that will accommodate them.

3.11 Decision

With the changeless development of the industry, MUA ‘s competitory advantage is hard to continue, therefore the direction must constantly evaluate and formulate new concern schemes to follow and put tendencies. The company must on a regular basis measure the regulative hazards, as alterations in Torahs and ordinance by the FSC can impact MUA ‘s ability to expeditiously and competitively behavior concern. The industry hazards, like PESTEL model, must be analysed to measure the chief rivals, demographic and societal tendencies, new engineerings that provide chances for competitory advantage, and economic, political and regulative developments