Kenya key to fruitful US-Africa insurance trade agreement
'If an agreement between Kenya and the US can be made then the benefits for insurance could be exponential'. Stephen Simchak, head of international, department vice president and counsel at the American Property Casualty Insurance Association (APCIA).
- Kenya offers opportunity despite substantial barriers
- APCIA flags issue of local data rules for global insurers
- US sees multibillion dollar impact of China trade tariffs
- UK and US step up regulatory cooperation to widen scope
Many re/insurers find that the most substantial opportunities for growth are in foreign markets, according to Simchak.
However, cross-border insurance trade can have substantial barriers to entry, such as forced localisation of data and caps on foreign investment. The goal of the APCIA is to leverage the US trade agenda to remove these barriers.
One key region is Africa, and establishing a trade relationship with Kenya could be the key to unlocking a beneficial relationship with the US and the rest of the continent. The US administration is now seeking to transform its relationship with Kenya, transitioning from one of aid to one of trade.
“Kenya is a prime example of an important emerging market that has very substantial barriers to entry to US insurance and reinsurance trade and investments, explained Simchak. “But if an agreement is made then the benefits for insurance could be exponential”.
The barriers to cross-border insurance and reinsurance come in many forms but Simchak noted that the forced localisation data is a particularly pertinent issue given that insurance is such a data-driven industry.
“With the forced localisation of data, any data you generate has to be stored in the domestic market. It undermines and complicates the ability of a global company to maintain good cyber security,” said David Snyder, vice president for international policy at APCIA.
The US-China trade relationship is also progressing. “We hope the tariffs implemented by China are phased out as soon as possible, as they are having a multibillion dollar impact in terms of insured costs,” said Snyder.
He explained that most autoglass used for cars are imported from China. But the 25 percent tariff on the glass is proving costly for insurers who have to repair automobiles.
Despite Latin America’s rapidly liberalising insurance market, there are still significant restrictions on cross border reinsurance.
“Brazil had quite a serious set of requirements but has now liberalised its reinsurance rules. However, while Brazil has now transitioned from a model where it props up its own state-owned insurance entities, other developing markets in the region have now adopted this Brazilian model,” said Snyder.
The US-Brazil trade relationships are now progressing and on March 9 2020, Brazilian President Jair Bolsonaro promised to restore the north-south strategic alliance with the US, pledging to slash regulations and promote investments.
Finally, the US and UK have a long standing bilateral relationship both in terms of government and insurance trade. As a member of the EU, the UK was part of the single trade policy and therefore did not have its own independent trade policy, according to Snyder.
“We find that because of the close relationship between the UK and the US, there are very few traditional trade barriers. We are therefore seeking to enhance regulatory cooperation and now with increased certainty on Brexit, the US and the UK can work more closely,” he concluded.
