By Megameno Shikwambi
Chief Executive Officer at the Namibia National Reinsurance Corporation (NamibRe), Patty Karuaihe-Martin has been accused of using the ongoing court case between the Ministry of Finance and the insurance industry to boost her company’s revenues to secure herself an increase in remuneration. Karuaihe-Martin is set to end her current term in office in September.
The Namibian National Reinsurance Corporation is categorized as a Tier 2 company due to the nature of its competitiveness, the level of its responsibility and the impact to the social life of the country. Tier 3 is regarded as the highest in terms of the legislation which governs State owned enterprises.
Karuaihe-Martin has in the meantime refuted these allegations as unfounded, amidst an ongoing court battle and claims by insiders that she is demanding N$ 800 000 from Government as a sign-on bonus to secure her signature for the next four years as CEO.
The court has in the meantime ruled in favour of insurance companies who argued that they should not be forced to do business with anyone given the free nature of the local economy.
The new rules have already been gazetted.
“This allegation is devoid of any truth. This is based on the fact that NamibRe as a public enterprise does not have the power to determine its remuneration, particularly that of the CEO and senior management,” said Karuaihe-Martin in an e-mailed response to questions.
She said that remuneration at the entity is regulated by the ministry of public enterprises.
“A careful historical review of NamibRe’s financial performance will show clearly that NamibRe is one of the best performing public enterprises in Namibia in terms of maintaining a healthy profitability, undertaking and obtaining good credit ratings,” she added.
However, sources that spoke to this publication have disclosed that NamibRe has failed dismally to bank the insurance deals offered to it in the past due to a lack of capacity.
NamibRe has been the first port of call to cede a part of their risk before ceding it elsewhere, the sources have said.
But Karuaihe-Martin tore into this as false, emphasizing that her entity is well capacitated.
She said NamibRe is backed by A-rated securities which puts it in a position to take more risk whenever it is offered.
“NamibRe, since its establishment has been in a position to honor its claims to all its clients,” she said.
Karuaihe-Martin further expressed that most insurers were placing their insurance via their subsidiary holding companies in South Africa “and in some instances only offer NamibRe risks which are not authorised by their holding companies or bad risks”. She said in this instance, NamibRe accepts such risks.
“And that is why, (as) per policy, it has become important to address the issue of anti-selection and minimise capital flow. Furthermore it should be noted that NamibRe has always been prudent in its acceptance of risk and does proper risk assessment when accepting any risk offered,” she also explained.
She cited a Namfisa annual report which claims that over N$1 billion in premiums were leaving which was not offered to NamibRe, hence the compulsory cession.
“The issue of capital outflow, which through the establishment of NamibRe the government tried to curtail, undermines national development. This is because the funds from the insurance and other long term investment funds are often used to develop infrastructure and also serve as affordable funds for countries to borrow from for development purposes,” said Karuaihe-Martin.
Other countries have introduced laws and regulations aimed at curbing this outflow.
These laws and regulations include per policy cession, exhaustion of local capacity before placement of business (i.e motor and life business), she further explained.
“For example, the South African government introduced stringent measures to prevent premium flow out of South Africa while in Namibia insurance companies continue to divert premiums made in Namibia to their parent companies in South Africa.
“It should be noted that Namibia is not the first country to do this. Other African countries, which include Ghana, Tanzania, Kenya, Ethiopia and even South Africa, where many of these companies operate in have introduced such reforms as a way of curbing capital outflow and also develop their local reinsurance industries,” she said.
Meanwhile, insurance companies have described the new legislation as draconian in that they seek to put in jail chief executive officers of companies found on the wrong side of the law. The issue is yet to be resolved at the Supreme Court where an appeal against the High court ruling in favour of companies has been lodged.