PRESENTATION BY: MRS. MARGARET IKONGO MANAGING DIRECTOR NATIONAL INSURANCE CORPORATION OF TANZANIA LIMITED.

PRESENTATION BY:

MRS. MARGARET IKONGO

MANAGING DIRECTOR

NATIONAL INSURANCE

CORPORATION OF TANZANIA

LIMITED.

REGIONAL WORKSHOP ON REGIONAL WORKSHOP ON PROMOTING RATIFICATION OF PROMOTING RATIFICATION OF

BASEL PROTOCOL ON LIABILITY BASEL PROTOCOL ON LIABILITY AND COMPENSATION AND COMPENSATION

FOR DAMAGES RESULTING FROM FOR DAMAGES RESULTING FROM TRANSBOUNDRY MOVEMENTS OF TRANSBOUNDRY MOVEMENTS OF

HAZARDOUS WASTES HAZARDOUS WASTES AND THEIR DISPOSALAND THEIR DISPOSAL

INTRODUCTIONINTRODUCTION

1:01:0

Insurance is defined by the Oxford Insurance is defined by the Oxford English Dictionary as “The act of English Dictionary as “The act of securing the payment of a sum of securing the payment of a sum of money in the event of loss or damage money in the event of loss or damage to (property, Life, etc.) by payment of to (property, Life, etc.) by payment of (a) premium(s).(a) premium(s).

1:1 1:1 The basic methods The basic methods of Handling Risksof Handling Risks

There are various risk management There are various risk management

tools used to carry out the tools used to carry out the

transformation of risks; these rangetransformation of risks; these range

from:from: Insurance/Reinsurance;Insurance/Reinsurance; Risk pooling;Risk pooling; Alternative Risk Transfer.Alternative Risk Transfer.

1:2 1:2 Role of Insurance Role of Insurance

in Societyin Society

• Insurance is a risk transformation Insurance is a risk transformation mechanism. In day to day business mechanism. In day to day business operations insurance is used as:operations insurance is used as:

• Source of capital support;Source of capital support;

• Risk Management tool;Risk Management tool;

• Provider of savings vehicles;Provider of savings vehicles;

• Risk spreading.Risk spreading.

…….. Continued Role of .. Continued Role of Insurance …..Insurance …..

Insurance business though has always been Insurance business though has always been “International” through spreading risks by “International” through spreading risks by reinsurance rationalization and globalization reinsurance rationalization and globalization has also brought changing environments has also brought changing environments within the industrywithin the industry

i.i. Competition from new players, products Competition from new players, products which were traditionally sold by Insurance which were traditionally sold by Insurance companies are now being sold by different companies are now being sold by different players altogether such as Banks, players altogether such as Banks, Supermarket and other retailers. Supermarket and other retailers.

ii.ii. Emergence of new risks and new Emergence of new risks and new products. Traditional Insurance used to products. Traditional Insurance used to cover accidental damage, theft, death cover accidental damage, theft, death etc., today we are witnessing Insurance etc., today we are witnessing Insurance cover available for:cover available for:

Weather interrupting a family holiday;Weather interrupting a family holiday; Hole in one at a golf course;Hole in one at a golf course; Contracting Contracting Disability, etc.Disability, etc.

…….. Continued .. Continued

Role of Insurance …..Role of Insurance …..

…….. Continued .. Continued Role of Insurance …..Role of Insurance …..

iii.iii. Harmonization:Harmonization: Harmonization of rules and laws to meet Harmonization of rules and laws to meet

legislatives requirements.legislatives requirements.

iv.iv. Insurance Industry like other financial Insurance Industry like other financial Institutions in many countries is subject to Institutions in many countries is subject to statutory regulation.statutory regulation.

2:02:0 COMESA YELLOW CARDCOMESA YELLOW CARD INSURANCE SCHEME INSURANCE SCHEME

2:12:1

The main purpose of my The main purpose of my

presentation:presentation:

COMESA Continued……COMESA Continued……

• Is to share experience on available regional Is to share experience on available regional insurance scheme which is shared by insurance scheme which is shared by member countries under COMESA.member countries under COMESA.

• The Common Market for Eastern and The Common Market for Eastern and Southern Africa (COMESA) is a regional Southern Africa (COMESA) is a regional integration grouping of 20 African sovereign integration grouping of 20 African sovereign states:-states:-

COMESA COMESA Continued …….Continued …….

• Angola, Burundi, Comoros, Democratic Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Sudan, Swaziland, Uganda, Zambia and Zimbabwe, which have agreed to promote Zimbabwe, which have agreed to promote regional integration through trade development regional integration through trade development and the development their natural and human and the development their natural and human resources for the mutual benefit of all their resources for the mutual benefit of all their people.people.

2:22:2Regional Motor Vehicle Regional Motor Vehicle

Insurance Scheme Insurance Scheme (Yellow Card)(Yellow Card)

Development of trade involves among other Development of trade involves among other things movement of goods from one county to things movement of goods from one county to another and the most common method is by another and the most common method is by vehicles. Each country had its own third party vehicles. Each country had its own third party liability motor Insurance requirement. liability motor Insurance requirement. Motorists crossing borders therefore had to Motorists crossing borders therefore had to take fresh cover at each border. The Yellow take fresh cover at each border. The Yellow Card was developed to solve this problem.Card was developed to solve this problem.

The main objectives of The main objectives of the Yellow Card Scheme the Yellow Card Scheme

are to:are to:

• Provide at least minimum guarantee, as those Provide at least minimum guarantee, as those required by the laws in force in the territories of the required by the laws in force in the territories of the parties to the Protocol, when the vehicles insured parties to the Protocol, when the vehicles insured are transiting the territories of other contracting are transiting the territories of other contracting parties;parties;

• Provide guarantee for road accident victims, fair Provide guarantee for road accident victims, fair and prompt compensation for damage or injury and prompt compensation for damage or injury they may have sustained as a result of road traffic they may have sustained as a result of road traffic accidents;accidents;

• Facilitate the smooth movement of vehicles Facilitate the smooth movement of vehicles between member States;between member States;

Yellow Card Yellow Card Continued……Continued……

• Encourage the greater movement of persons and Encourage the greater movement of persons and goods and promote the development of intra-goods and promote the development of intra-COMESA trade and tourism; andCOMESA trade and tourism; and

• Provide to the Insurance Industry, a simple and Provide to the Insurance Industry, a simple and economical mechanism to operate.economical mechanism to operate.

• The scheme has been operational for the past The scheme has been operational for the past fifteen years. Member countries that are party to fifteen years. Member countries that are party to the Scheme are: Burundi, Democratic Republic of the Scheme are: Burundi, Democratic Republic of Congo, Eritrea, Ethiopia, Kenya, Malawi, Rwanda, Congo, Eritrea, Ethiopia, Kenya, Malawi, Rwanda, Swaziland, Tanzania, Uganda, Zambia and Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.Zimbabwe.

2:32:3Scheme ManagementScheme Management

• The scheme is administrated by a network of The scheme is administrated by a network of National Bureaux designated by each National Bureaux designated by each member countries. A National Bureau is a member countries. A National Bureau is a National focal point representing insurance National focal point representing insurance companies issuing Yellow Cards: Insurance companies issuing Yellow Cards: Insurance Companies authorised to underwrite motor Companies authorised to underwrite motor insurance business in the country. The insurance business in the country. The National Bureau is responsible for the National Bureau is responsible for the administration and control of the operations of administration and control of the operations of the Scheme in its own country.the Scheme in its own country.

• The National Bureaux are The National Bureaux are multilaterally committed through an multilaterally committed through an Inter-Bureaux Agreement and have Inter-Bureaux Agreement and have reciprocal arrangements among reciprocal arrangements among themselves. In the sense that each themselves. In the sense that each National Bureau has undertaken to National Bureau has undertaken to handle and settle claims on behalf of handle and settle claims on behalf of member National Bureaux, which member National Bureaux, which arose from accidents involving visiting arose from accidents involving visiting motorists.motorists.

Scheme Management Scheme Management Continued ………Continued ………

Scheme Management Scheme Management Continued ………Continued ………

• At a regional level, the National Bureaux At a regional level, the National Bureaux constitute a council of Bureaux. The Council constitute a council of Bureaux. The Council of Bureaux is the highest body to co-ordinate of Bureaux is the highest body to co-ordinate and supervise the legal, administrative and and supervise the legal, administrative and financial operations of the National Bureaux financial operations of the National Bureaux and the Yellow Card Scheme. The and the Yellow Card Scheme. The COMESA Secretariat is the Interim COMESA Secretariat is the Interim Secretariat for the Council of Bureaux.Secretariat for the Council of Bureaux.

• The scheme has since been expanded to The scheme has since been expanded to cover property damage (which is not covered cover property damage (which is not covered by Insurance ordinance in some member by Insurance ordinance in some member countries) and medical expense for motorist countries) and medical expense for motorist and passengers should they suffer bodily injury and passengers should they suffer bodily injury as result of an accident.as result of an accident.

• One of the challenges is to harmonise the laws One of the challenges is to harmonise the laws and regulations of member countries that and regulations of member countries that govern the civil liability for motor vehicle third govern the civil liability for motor vehicle third party liability.party liability.

Scheme Management Scheme Management Continued ………Continued ………

2:42:4Performance in figuresPerformance in figures

• It is estimated that over 60,000 It is estimated that over 60,000 vehicles use Yellow Cards annually. vehicles use Yellow Cards annually. The number of companies issuing The number of companies issuing Yellow Card is now over 160.Yellow Card is now over 160.

SUMMARY OF YELLOW CARDS ISSUED AN PREMIUMS COLLECTED FOR THE PAST FIVE YEARS EFFECTIVE

1998

ITEM ITEM NO.NO.

YEARYEAR NO. OF YELLOW NO. OF YELLOW

CARDS ISSUEDCARDS ISSUED PREMIUM COLLECTED IN PREMIUM COLLECTED IN

US DOLLARUS DOLLAR

11 1998/99 1998/99 29,423 29,423 968,089.00 968,089.00

22 1999/00 1999/00 22,138 22,138 557,981.00 557,981.00

33 2000/012000/01 28,767 28,767 938,737.00 938,737.00

44 2000/02 2000/02 25,936 25,936 785,501.00 785,501.00

55 2002/03 2002/03 38,477 38,477 1,712,517.00 1,712,517.00

TOTALTOTAL 144,741144,741 4,962,825.004,962,825.00

2:52:5

• The scheme has its own pool which was The scheme has its own pool which was funded by members, each member funded by members, each member contributed USD.100,000.00, the pool contributed USD.100,000.00, the pool known as Yellow Card Reinsurance Pool known as Yellow Card Reinsurance Pool is managed by ZEP RE (PTA Reinsurance is managed by ZEP RE (PTA Reinsurance Company) based in Nairobi.Company) based in Nairobi.

3:03:0BASEL PROTOCOL BASEL PROTOCOL

ON LIABILITYON LIABILITY

Article 14 (1)Article 14 (1)• 1)1) The persons liable under Article 4 shall The persons liable under Article 4 shall

establish and maintain during the period of establish and maintain during the period of the time limit of liability, insurance, bonds or the time limit of liability, insurance, bonds or other financial guarantees covering their other financial guarantees covering their liability under Article 4 of the Protocol for liability under Article 4 of the Protocol for amounts not less than the minimum limits amounts not less than the minimum limits specified in paragraph 2 of Annex B. specified in paragraph 2 of Annex B.

• States may fulfill their obligation under this States may fulfill their obligation under this paragraph by a declaration of self-paragraph by a declaration of self-insurance. Nothing in this paragraph shall insurance. Nothing in this paragraph shall prevent the use of deductibles or co-prevent the use of deductibles or co-payments as between the insurer and the payments as between the insurer and the insured, but the failure of the insured to insured, but the failure of the insured to pay any deductible or co-payment shall pay any deductible or co-payment shall not be a defence against the person who not be a defence against the person who has suffered the damage.has suffered the damage.

BASEL PROTOCOL BASEL PROTOCOL Continued ……..Continued ……..

Damage means:Damage means:

Article 2 (c )Article 2 (c )2)2)i.i. Loss of life or personal injury;Loss of life or personal injury;ii.ii. Loss of or damage to property other than Loss of or damage to property other than

property held by the person liable in property held by the person liable in accordance with the present Protocol;accordance with the present Protocol;

iii.iii. Loss of income directly deriving from an Loss of income directly deriving from an economic interest in any use of the economic interest in any use of the environment, incur=red as a result of environment, incur=red as a result of impairment of the environment, taking into impairment of the environment, taking into account savings and costs;account savings and costs;

Damage means: Damage means: Continued …….Continued …….

iv.iv. The costs of measures of reinstatement of the The costs of measures of reinstatement of the impaired environment, limited to the costs of impaired environment, limited to the costs of measures actually taken or to be undertaken; measures actually taken or to be undertaken; andand

v.v. The costs of preventive measures, including The costs of preventive measures, including any loss or damage caused by such measures, any loss or damage caused by such measures, to the extent that the damage arises out of or to the extent that the damage arises out of or results from hazardous properties of the wastes results from hazardous properties of the wastes involved in the transboundary movement and involved in the transboundary movement and disposal of hazardous wastes and other wastes disposal of hazardous wastes and other wastes subject to the Convention.subject to the Convention.

3:13:1Insurance exclusionInsurance exclusion

• Risk required to be covered under the Risk required to be covered under the protocol are in general exclusions under protocol are in general exclusions under Insurance contracts.Insurance contracts.

• It is indicated that Governments may It is indicated that Governments may declare self insurance in order to meet the declare self insurance in order to meet the requirement for Article 14. It is however, requirement for Article 14. It is however, noted that in many instances the “so called noted that in many instances the “so called self insurance fund” does not exist, self insurance fund” does not exist,

… … this is mainly because Governments this is mainly because Governments respond after events and rely on respond after events and rely on budgets, including diversion of budgets, including diversion of Resources from other project etc.Resources from other project etc.

• It is therefore not possible or rather It is therefore not possible or rather difficult for self insurance to work.difficult for self insurance to work.

4:04:0CREATION OF POOLCREATION OF POOL

Combination of resources, funds to handle a Combination of resources, funds to handle a similar problem. Governments can react to similar problem. Governments can react to this requirement of the protocol by creating a this requirement of the protocol by creating a pool. pool.

4:14:1 Definition of a PoolDefinition of a Pool

Definition of a Pool Definition of a Pool Continued ……….Continued ……….

• Pools are created in most case to Pools are created in most case to address the issue of :-address the issue of :-

• Insurance un-affordabilityInsurance un-affordability• Insurance un-availabilityInsurance un-availability• Pools provide risk financing and Pools provide risk financing and

capacity.capacity.

4:24:2Types of PoolsTypes of Pools

• Pools can be funded or non-funded.Pools can be funded or non-funded.

4:2:14:2:1Funded PoolsFunded Pools

Examples:-Examples:-

i.i. AFRICA REAFRICA RESet up with limited liability by member countriesSet up with limited liability by member countriesof the then Organization of Africa Unit (OAU).of the then Organization of Africa Unit (OAU).

ii.ii. ZEP RE (PTA Reinsurance Company)ZEP RE (PTA Reinsurance Company)iii.iii. ATI – African Trade Insurance AgencyATI – African Trade Insurance Agency

Set up by World Bank fully funded credit to ATI Set up by World Bank fully funded credit to ATI members to back up Insurance policies.members to back up Insurance policies.Provides cover for political risks, credit Insurance, Provides cover for political risks, credit Insurance, as well as non payment and Foreign Direct as well as non payment and Foreign Direct Investment. The risks covered by ATI are not Investment. The risks covered by ATI are not available under normal insurance covers.available under normal insurance covers.

4:2:24:2:2Non-Funded PoolsNon-Funded Pools

Examples:Examples:i.i. Federation of African of Afro-Asian Insurers Federation of African of Afro-Asian Insurers

and Reinsurers Aviation Pool.and Reinsurers Aviation Pool.ii.ii. African oil and energy pool.African oil and energy pool.iii.iii. African Aviation PoolAfrican Aviation Pool

The aim of non-funded capacity is in many The aim of non-funded capacity is in many cases to give each other protection and cases to give each other protection and business, normal a member company is business, normal a member company is appointed to manage the pool.appointed to manage the pool.

4:2:34:2:3Intergovernmental Risk Intergovernmental Risk

PoolsPools• Japan Pools known as (Kyousai) were formed in Japan Pools known as (Kyousai) were formed in

the late 1940’s and continue to operate the late 1940’s and continue to operate successful. These are local government risk successful. These are local government risk financing.financing.

• United States of America began to operate pools United States of America began to operate pools in mid-1970’s. It is estimated that there are over in mid-1970’s. It is estimated that there are over 400 pools operating in the USA.400 pools operating in the USA.

• Pools can also be found in Australia, Canada, Pools can also be found in Australia, Canada, Netherlands.Netherlands.

4:2:44:2:4

The performance of most of the pools The performance of most of the pools show that pools are doing well and show that pools are doing well and achieving their objectives. Example of achieving their objectives. Example of few:-few:-

African Oil and Energy African Oil and Energy Pool:Pool: Capacity USD. Capacity USD.

2.6 m.2.6 m.

GPW (USD)GPW (USD) U/W ResultU/W Result Trading Trading ResultResult

20002000 1,659,058 1,659,058 (298,180) (298,180) (355,966) (355,966)

20012001 4,256,207 4,256,207 692,715 692,715 493,405 493,405

20022002 5,640,472 5,640,472 856,409 856,409 610,474 610,474

African Aviation Pool:African Aviation Pool: Capacity USD. 3.4 m.Capacity USD. 3.4 m.

GPW (USDGPW (USD U/W ResultU/W Result Trading Trading ResultResult

20002000 1,682,373 1,682,373 133,664 133,664 32,560 32,560

20012001 2,431,380 2,431,380 1,091,222 1,091,222 961,988 961,988

20022002 3,356,115 3,356,115 884,251 884,251 600,241 600,241

5:05:0RECOMMENDATIONRECOMMENDATION

• Since hazardous wastes are an Since hazardous wastes are an exclusion under traditional insurance exclusion under traditional insurance covers, the best approach would be covers, the best approach would be for the respective Governments to set for the respective Governments to set up a pool to handle such risks.up a pool to handle such risks.

6:06:0CONCLUSIONCONCLUSION

• I thank the workshop organizers for giving me an I thank the workshop organizers for giving me an opportunity to participate in this workshop. opportunity to participate in this workshop.

• I hope I have been able to kick start a way forward which I hope I have been able to kick start a way forward which will help promote this important protocol, more work will will help promote this important protocol, more work will have to be done if the workshop will decide on creation of have to be done if the workshop will decide on creation of a pool as a solution.a pool as a solution.

• Let me share with you this statement which I came across Let me share with you this statement which I came across on GAPS IN INSURANCE COVERS. “There are many on GAPS IN INSURANCE COVERS. “There are many problems associated with Insurance as it stands today. problems associated with Insurance as it stands today. Even without the impact of climate change, Insurance Even without the impact of climate change, Insurance poses a number of major problems. poses a number of major problems.

CONCLUSION CONCLUSION Continued …. …….Continued …. …….

• FirstFirst, 80% of losses are not insured at all., 80% of losses are not insured at all.• SecondSecond, it represents a very inefficient process, , it represents a very inefficient process,

where 30% of funds collected are not recycled to where 30% of funds collected are not recycled to victims. This percentage is even higher in third world victims. This percentage is even higher in third world countries.countries.

• ThirdThird, Insurance is generally restricted to rich people., Insurance is generally restricted to rich people.• FourthFourth, product design has resulted in short term, , product design has resulted in short term,

restrictive products. This has negative consequence restrictive products. This has negative consequence for the rest of the Financial Industry.for the rest of the Financial Industry.

• FinallyFinally, there is lack of capital with unstable prices , there is lack of capital with unstable prices and volatile demands”.and volatile demands”.

REFERENCE:REFERENCE:

• COMESA Yellow Card manuals.COMESA Yellow Card manuals.

• FAIR Review No. 132 June, 2004FAIR Review No. 132 June, 2004

• C.I.I. Insurance Research and Practise Vol. C.I.I. Insurance Research and Practise Vol. 16 January, 2001.16 January, 2001.

• UNEPFI – Finance, Environment and UNEPFI – Finance, Environment and sustainable Development European sustainable Development European Seminar.Seminar.

THE ENDTHE END

Thank you for your Thank you for your attention.attention.