Afghan entrepreneur Sayed Sadat Mansoor Naderi who founded Afghanistan’s first private insurance firm is optimistic about the economic growth of the country, expressing hopes that an absolute peace would have a huge positive impact on economy.
“For the Afghanistan economy I always like to be optimistic hoping for absolute peace in our country which will have a huge positive impact on Economic growth,” he said in response to a question about the future of Afghanistan’s economy.
Mr. Naderi further added “I do expect Afghanistan with peace to achieve the highest Economic growth rate compared to any Country in the World. New projects whether in infrastructure, mining, retail or hospitality shall trigger exponential economic growth.”
“In turn, driving all other sectors forward including the Insurance industry as each project will simply require Project Cargo Insurance and Construction Insurance, protection of employees from accidents or health. Assets insurance such as vehicles and buildings,” he added.
Naderi registered Insurance Corporation of Afghanistan (ICA), the first private insurance firm in 2007 despite expecting to incur high losses for a couple of years.
The UK-based Capital Finance International recently declared ICA as 2019 winner of the Best Insurance Company (Afghanistan) award.
The judging panel of Capital Finance International unanimously declared ICA as the winner of the award, recognizing the impressive portfolio of the company, tailor-made insurance solutions and the company’s continued role in fueling product development to best serve Afghanistan’s needs.
Challenges and barriers the insurance sector facing in Afghanistan:
Meanwhile, Naderi said establishing an insurance company anywhere is bound to involve complications. Our typical standard challenge was developing a local insurance company in a largely deserted market accepting to incur losses until foundations are set. While this has been an incredibly ambitious risky project, neither ICA nor SMN Investments were short on motivation, and ICA, while still in an infant insurance market, has made extraordinary strides into the market.
He said ICA has faced three primary challenges: providing confidence and security to its clients in a new, growing, and insecure environment; collaborating with lawmakers to shape a legal environment capable of cultivating an insurance industry; and convincing local clientele of the personal benefit insurance provides, despite the lack of fair compulsory insurance laws. Since 2007, ICA has been vigorously addressing these challenges and shall continue doing so.
“As with many other SMN ventures, ICA strive to operate according to international best practices,” he said, adding that “This has allowed the company to forge partnerships with many of the world’s largest international insurance and reinsurance companies such as Swiss Re, Hannover Re, top syndicates at the Lloyd’s of London as well as Zurich Insurance Group.”
These partnerships provide reinsurance security and credibility to ICA various stakeholders. We have achieved a huge edge above other local players and have elevated our reputation significantly with such partnerships, Naderi added.
Government’s role in promoting the insurance sector in Afghanistan:
In regards to government’s role in promoting the insurance sector in Afghanistan, Naderi said ICA is continuously advising the GDIA and other relevant government bodies to improve the insurance legal landscape.
“Hence, for any insurance market to witness success the government is the main player to make initiative work in line with international best practices. For example, the GCC insurance market grew at 300% from 2006 to 2016 due to various compulsory insurances such as health, motor, fire and third party liabilities. Despite that, insurance penetration rate in the GCC (Average 1.9%) is still low compared to Europe (6.72%) or Asia (5.59%),” he added.
However, he said “As for Afghanistan, unfortunately we lack the transparency that are standard in other 3rd World Countries (e.g. Jordan, Iraq, Uzbekistan) and we don’t know the market size or the insurance penetration rate yet. We are hoping to see insurance statistics released by the GDIA so we can all work as one body to appear on the World’s insurance map.”
He also added “A good move forward made recently by the government is enforcing fire insurance on commercial entities; ICA welcomes such an initiative and will advise the government as in fire insurance certain codes of construction are required to be eligible for insurance. Such move if implemented properly will make reforms on standards affecting the whole community positively.”
Suggestions and recommendations to government to improve insurance sector in Afghanistan:
Meanwhile, Naderi said the government has a critical role to move matters forward, suggesting that it should set a clear road map for the insurance industry like ‘’2025’’ on insurance, obtain technical-knowhow support from other countries regulators and review the insurance law to fairly treat local companies according to facts compared to other countries.
He also suggested that the government should protect the insurance market through having strict fines for the ones who insures abroad and regulating the issuance of pure Fronting policies as these would leak high premium volume outside of the country affecting Afghanistan hard currency position.
According to Naderi, the government should also conduct periodic Technical Audits ensuring that companies operate according to internationally accepted solvency margins through tighter control on policy issuance ensuring that companies operating in the market will deliver their promise in paying a covered claim supported by sound reinsurance support through balancing exposure with the strength of the balance sheet.
In other parts of his suggestions, Naderi said the government should also consider HR review. “In most insurance regulations across the globe management of insurance companies should have the minimum necessary expertise to manage an insurance company we need to see these adopted so every company should have strict technical and underwriting discipline,” he said.