The insurance industry in Afghanistan, though small in size, is poised for growth with increasing awareness and opportunities resulting from the government’s push for infrastructure development in the country. Although terrorism is still a major concern, it has not dampened the business environment with commercial activities on the increase.
By Jimmy John
There are currently four insurance companies operating in Afghanistan – Afghan Global (AGI), Insurance Corporation of Afghanistan (ICA), Sky International and state-owned Afghan National (ANIC).
ANIC has been operating in the market for over 40 years and has products in the personal lines, motor third-party and householders segment. AGI was established in 2010 and is mainly involved in Indian business as its shareholders are Afghan/Indian. The company does business with the smaller companies in the market and writes all classes of business and reinsures them in the Indian market.
Sky International is relatively new in the market and is involved with travel insurance. It has also fronted a few risks on behalf of non-admitted carriers. ICA handles the larger commercial enterprises, such as telecoms, banks, embassies, construction companies, public sector, US agencies and the like, said Mr Kevin Hartnett, COO/chief underwriting officer of ICA.
Current state of the market
ICA was the first private insurance company to establish commercial insurance in the country in 2007 and the insurer started underwriting operations and marketing its products across most lines and classes of business from March 2008.
“The industry, although embryonic, is growing exponentially. And as more Afghan businesses become aware of the importance of insurance protection for their assets, shareholders and workforce, we anticipate a substantial growth going forward,” said Mr Hartnett on the current state of the market.
Currently all classes of business are insured in Afghanistan, with the exception of financial lines, ie, surety and performance bonds, due to lack of credible financial data, in terms of historical financial and internationally audited accounts.
Most of the business insuring Afghan companies, whether local or international, are reinsured. “For ICA, reinsurance on some 75-80% of our inward account is reinsured at Lloyd’s or in the London market, with the remainder reinsured in global ‘A’ rated reinsurance markets,” said Mr Hartnett, whose company reinsures in excess of 20 markets located in the Middle East, Europe, the Far East, the US, Australasia, India and Pakistan.
Safe business environment
Terrorism is a major concern in Afghanistan, but most companies engage security services for their staff and their offices. “There are insurgent problems, but these are not restricted to Afghanistan. The recent attacks in Europe, London, Brussels and Paris simply endorse the fact that the problems of terrorism and insurgency are worldwide and not just confined to a single country,” said Mr Hartnett on the situation on the ground for businesses.
ICA employs a number of expatriates, mostly from the Lloyd’s and London markets, as well as middle management from the Third Country National (TCN) sector. “Expatriates and TCNs regularly attend client meetings in the city, supported by security, and there has never been a problem,” he said.
ICA, which has 75 employees, also employs a number of local staff, mainly graduates, all of whom have gone through a robust and rigorous training programme. “We have achieved a healthy staff retention and the only staff we have lost is for emigration purposes, and certainly none to competitors or other financial institutions,” Mr Hartnett said.
Market attractive for reinsurers
Afghanistan is susceptible to earthquakes, of which there are a few every year, but these are mostly small causing minor property damage and few casualties. The last big earthquake to affect Kabul was in 1911, where there was some serious property damage and a loss of over 400 lives.
“There is huge potential for the Afghanistan insurance sector and it is proving very attractive to a variety of reinsurers, mainly because it is non-accumulative,” said Mr Hartnett.
He said the building standards in Afghanistan have improved immensely over the past few years. Many new buildings are constructed to withstand earthquakes and the quality of these new buildings is similar to British building standards.
International support essential
The support of the international community is pivotal for Afghanistan’s insurance sector to thrive and succeed. “This is essential as capacity and capital are not at a level within the local insurance sector to support coverage requirements,” said Mr Hartnett.
He highlighted that over the past 10 years, ICA has insured aggregate of sum insured in excess of $35bn and this represents less than 10% of insurable interests, so there is still a long way to go.
“With available capital and capacity, the vast majority of our sum insured aggregate, even on a PML basis, is reinsured internationally where capacity for Afghanistan is more readily available,” said Mr Hartnett.
The future is bright
With increasing international support for Afghan businesses and donorship to build infrastructure and educate the masses growing, he believes that the future is very bright for the insurance sector in Afghanistan. “There is a certain amount of dependency with regards to the economic and security stability being maintained and improved, but there is a strong perception from the vast majority of Afghans that they want to progress in terms of global trading and bringing peace and stability to their country after countless years of warring turmoil,” said Mr Hartnett. M