Zimbabwe became Africa Trade Insurance Agency’s (ATI) 12 member state in October 2016. Risk and Insurance Zimbabwe (RI) got the chance to interview ATI, CEO George Otieno (GO) who managed to share the benefits of joining ATI and what ATI has lined up for Zimbabwe in 2017 and the near future in terms of Investment projects.
RI: When did Zimbabwe officially become a member of ATI and what activities have ATI taken in Zimbabwe since then?
GO: Zimbabwe officially joined ATI as its 12th member state in October 2016. ATI is now able to support various projects and already, we are close to finalizing transactions linked to various projects worth over US$300 million in the financial and energy sectors.
RI: What are the benefits of Zimbabwe being a Member of ATI
GO: A stumbling block to increasing both trade and FDI in Africa are the perceived (and sometimes real) political and commercial risks. ATI provides insurance for these risks. This enables lenders, traders and foreign investors to enhance insured transactions by assigning the ATI rating to the covered perils. This should translate to lowered financing costs or better terms thereby lowering the cost of doing business and increasing the appetite for African risks.
ATI will assist the country access financing for a range of infrastructure and other important projects. ATI has been rated ‘A’ by Standard & Poor’s for 9 consecutive years. This rating gives ATI credibility and respect from a wide network of international partners, which enables us to facilitate inward investment opportunities into our member countries, including Zimbabwe.
ATI also has a preferred creditor status giving international reinsurers, banks, investors and other corporates comfort making them more willing to participate in transactions in Zimbabwe.
RI: How can Zimbabweans utilize and benefit from the products offered by ATI
GO: To date, ATI has helped its member countries to attract over $25 billion worth of trade and investments in sectors such as Agriculture, Energy, Roads and Telecommunications. In these countries, ATI’s support has ensured upgrades of water and energy infrastructure, upgrades of roads, construction of housing and commercial buildings, for both Government and Private sector projects. We support domestic banks and traders by offering protection against loans and supplier credit. We intend to bring this value added proposition to the Zimbabwean economy.
RI: How does a company or individual subscribe to Insurance products by ATI and what is the claims process.
GO: The process of doing business with ATI is quite simple. We encourage companies or individuals to contact us at Zimbabwe@atiaca.org. From there we will ascertain whether we are able to support the transaction. If the project seems viable at the outset, we will then ask interested parties to fill out a form that provides us with details of the transaction including financial information. The entire process can take days or weeks depending on the time it takes potential clients to submit all the required documents.
Regarding the claims process, ATI monitors transactions so that ideally, we are able to flag any issues of concern before they become claims. We try as much as possible to resolve cases before they become claims but, in the event a claim is unavoidable, we are ready and able to pay.
The objective of ATI is to mitigate all the risks it insures and to recover realised claims in a timely manner. Our claims process is a simple 9 step procedure which on average takes not less than 270 days before payment.
- The insured notifies ATI of the Claim
- ATI acknowledges receipt of the notification
- ATI reminds the insured of the policy obligation including applicable timelines
- ATI requests for supporting documents on the claim
- The claim is then reviewed
- Mitigation of loss by engaging the 3rd party where necessary or engaging directly with the Government to prevent loss where the counterparty was a sovereign or sub sovereign entity
- If mitigations aren’t successful, the claim is assessed
- Payment is done
- ATI follows up for recoveries
RI: Zimbabwe is currently politically unstable what are the benefits of the Political Risk Insurance and how does the current situation in Zimbabwe affect premiums.
GO: To clarify your question, Political Risk Insurance (PRI) is used globally. In fact, it is common place in developed markets, where the rate of claims is somewhere in the range of less than 12%.
You’ll find that on most large transactions, PRI would be factored into the overall cost. In Africa, this product is relatively new and not used in the same amount as the West. This is due to the fact that Africa has long been operating outside of the international financial framework, where financial institutions have been legislated to put in place risk mitigation. With the advent of globalization, and Africa’s desire to attract more FDI, this is slowly changing. The other aspect of this issue is that Africa has been seen for decades as the world’s riskiest continent.
Much of this has been based on perception rather than fact. This is where ATI is helping. With our presence on the ground and our growing network of international partners, who have come to trust our risk assessments, we are slowly changing the story line to one where African risk becomes bankable.
Concretely, ATI offers 4 types of cover including political risk insurance (PRI), which includes sovereign and sub sovereign non-payment risks. This is also called investment insurance. The other three are commercial risk (which is primarily cover on private sector lenders or buyers against non-payment risks), surety bonds (which we provide to banks and insurance companies) and political violence, terrorism and sabotage (PVT&S) which we can offer as direct insurance or on a reinsurance basis to insurance companies. It is important to note that ATI does not compete with local insurers. Instead, we help them to increase their capacity. This has been the case specifically for two of our products political violence & terrorism and for bonds.
PRI insures investments, projects, goods and/or contracts against losses arising from actions/ inactions of the Government or a loss following political events outside the control of the contracting parties. Typically two parties are involved in one transaction: an investor or supplier and a counterpart or buyer. However, at times more parties are involved in PRI transactions, such as when banks or lenders are supporting contractors/service providers. The insurance policy covers investments or credit periods of up to 15 years. Zimbabwe would benefit from transactions that would not be considered by the international markets mainly because of ATI’s preferred creditor status and it’s a rating from the Standard and Poors.
For PRI, we use the price to risk model. This takes into account the country’s past present and projected economic and political situation. While we cannot disclose the exact rate we have charged for existing deals, we can confirm that the rates used are in the same range as what we have been charging other member states.
RI: ATI is involved in large infrastructural projects in its member countries are there any such products lined up in Zimbabwe?
GO: In the last three years, ATI has supported investment projects, many of which were directly related to infrastructure, worth over US$ 9 billion in its nine member states. Our infrastructure related pipeline for Zimbabwe is $600 million, many of which we hope to close in the near future.
RI: What can Zimbabwe look out for in 2017 from ATI?
GO: ATI is keen to support Zimbabwe. The country has so much untapped potential and it’s precisely for this reason that ATI was created. We have seen significant demand for our insurance and we are confident Zimbabwe will benefit from infrastructure and energy developments as a direct result of ATI’s support. ATI will also promote support for other productive sectors of Zimbabwe’s economy and work to build domestic, regional and international capacity to support business opportunities in Zimbabwe.