Aakash Mishra: “The BAI affair will not affect the insurance sector in the long run”
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The Insurers Association of Mauritius’ new Chairman says our financial sector is highly rated on the international scene and that the recent financial scandal will not tarnish its good reputation.
BUSINESSMAG. The insurance sector is in turmoil since the BAI affair broke out early April. The Financial Services Commission has been criticized for failing to take actions when the company was not complying with regulations regarding related party transactions. The regulator was also challenged by the Rainbow Insurance before court for the decision to suspend its licence. How do you assess the current situation?
If the regulator is of the view that an insurance company is not being run as per the existing laws, regulations and guidelines, it is well within its rights to take necessary corrective steps. But I am not passing any judgment here on any company. Our stand is to wait for the entire investigation to be over as far as the BAI case is concerned.
As far as Rainbow Insurance is concerned, the judgment has come out only recently and the Privy Council decided in favour of the FSC. We shall be discussing its findings at the next meeting of the Association. But the Association, just like the regulators, would want the interest of the policyholders to be protected.
Mauritius is a mature market and we don’t see any panic in the industry because of a solitary incident. Most of the companies are well capitalized. As the regulator, the FSC is keeping a close eye on the health of each company in terms of their ability to service future claims, etc. Companies are taking steps to be more transparent in their communication with their policyholders so that there is no room for any misgivings.
BUSINESSMAG. What will be the impact of the BAI affair on the insurance sector and the image of our financial sector on the international scene?
I don’t think it will affect the image in the long run. People understand and appreciate the need for insurance. One solitary incident cannot be allowed to tarnish the entire sector. We should wait for the final outcome of the process.
The world sees Mauritius as an economy which is well regulated, stable and where rule of law prevails. For the outside world, Mauritius as a nation comes out as high on the ease of doing business, good infrastructure and IT facilities, It is ranked 1st in sub-Sahara and 19th worldwide in terms of ease of doing business, according to the World Bank’s Doing Business 2013 report. No world is averse to prevalence of rule of law. It only strengthens the belief in the regulatory regime.
BUSINESSMAG. What should be the stance of the government in the light of this financial scandal?
It’s a difficult question to answer. We let government carry out their business of governance. Truth and justice must prevail and policyholder’s interest should be ultimately protected upheld.
BUSINESSMAG. The insurance sector has been growing at a steady pace of 4.5 - 4.7% over the past years. Can growth be impacted by the recently uncovered scams?
Insurance is already an important segment of the financial sector and will always remain so. Insurance funds, by virtue of their long-term investments, assist in nation building. Financial and insurance activities together contribute above 10% to the GDP, year after year. Out of this, insurance contributes above 3%. There is a lot that can be done in the insurance sector. We will have to innovate and bring about changes in the way we distribute products. Efficiency and productivity need to be enhanced. In the latest Budget, the government has emphasized on the Training Institute in Réduit. This is a most welcome step towards skill building. Also the digital policy contract is a forward looking initiative which will also bring about changes in encryption, data confidentiality and digital signature rules.
Worldwide, insurance is always seen as a strong pillar of the economy, not only covering risks of all kinds but also providing a stable and long term fund for infrastructure development.
BUSINESSMAG. How does the insurance sector stand right now?
Mauritius has a fairly mature insurance market. We have 12 Non-Life and 7 Life insurers on the market. Life insurers generated a total gross premium of Rs 15.03 billion in 2013 as compared to Rs 13.89 billion in 2012, representing an increase of 8%.
Likewise, the gross premium in respect of general insurance business for the year 2013 amounted to Rs 7.03 billion against Rs 6.18 billion in 2012, representing an increase of 14%. We provide employment to 3,000 persons directly and many more indirectly. Mauritius has a strong tradition of life savings products, including retirement / pension plans and, as such, life insurance penetration is already high (at 4.5% of GDP). The overall reputation of Mauritius as a business-friendly, dynamic nation which is governed by rule of law only aids in fostering insurance growth. We have FSC as a regulator which oversees the industry through financial statements, onsite inspections, exceptional reporting amongst other things. We work closely with FSC on a range of topics related to new laws, regulations or guidelines.
BUSINESSMAG. How will the new Insurance Act improve the business environment?
Our reaction to the new Insurance Act is that it appears to be addressing a specific issue and its need is unlikely to be felt for any other insurer since the liability asset mismatch is pegged very high at Rs1 billion.
Having said that, we feel that regulatory independence should be further strengthened so as to ensure objective decision making based on established criteria. This is the prism under which Mauritius would be evaluated by external agencies in future.
BUSINESSMAG. What are your priorities as new Chairman of the insurers Association?
As a president of Insurers Association of Mauritius, my first and topmost priority is to work together with authorities to instil a sense of confidence in public at large on the industry. As you know, insurance in Mauritius dates back from the 19th century. Insurance is a necessity and not a luxury.
We would also work with institutions to ensure that Mauritius becomes a hub for skilled insurance personnel. Not only should it meet local demands but African nations should also look towards Mauritius to manage their risks or handle their customer services, back office operations in the long run. We would also want health insurance to become a byword, so that more and more people come within its ambit, thereby reducing the load on government hospitals. Private pensions are also an area to be explored further. With the PPSA act of 2012 in force, we would want more and more companies to take advantage of this law.
