African Reinsurance Corporation has announced the partial lifting of its unilateral ban on the issuance of new political violence treaty (PVT) insurance cover for capital assets in regions under State of Emergency in Ethiopia.
Following intense negotiations between the Ethiopian Insurance Companies Association and the Reinsurer, one of Africa’s top reinsurance firms, a letter addressed to insurance companies on November 6th, stated that the Corporation will now allow the issuance of new PVT cover only for capital assets, according to sources.
In August, African Reinsurance imposed the suspension, citing ongoing conflicts of varying magnitude, type, and nature in parts of Ethiopia. These conflicts had led to ambiguity in policy interpretations and posed challenges in courts. Consequently, the reinsurer suspended the issuance of new PVT covers in any region under a state of emergency or that may be declared in the future.
“We did not agree with the reinsurer’s decision from the get-go. We have argued that regions under a state of emergency are more protected as more government forces are deployed,” Yared Molla, president of the Ethiopian Insurance Companies Association and CEO of Nyala Insurance, said.
“We asked for a review of its suspension,” he said emphasizing that they fought tooth and nail for the partial lift.
The Association believes that the ban on PVT cover for movable properties is neither sensible nor applicable.
Yared explained: “Because Addis Ababa is not under a state of emergency, we could provide new PVT cover, for instance, for a car. However, if the owner makes a claim for damage after entering an area under a state of emergency, how could we respond to that claim?” the CEO asked, noting they are still striving for a complete lift of the ban.
Sources within the insurance companies have revealed that branch offices are yet to be informed about the new development. They have been operating under the ban imposed in August.
Experts have noted that conflicts and emergency declarations have led to a surge in the demand for PVTs in Ethiopia.
A high-ranking insurance executive, highlighted that while both local and foreign investors are increasingly seeking PVT coverage, foreign investors get the majority as they have the advantage of greater awareness.
“Over the years, many individuals have collected their claims by providing evidence of damage,” the Executive said, emphasizing that PVT cover is not issued in isolation.
Companies must first have mandatory fire and flood insurance.
Regarding the legality of African Re’s ban, the expert clarified that the company has the right to decide what and whom it will cover.
“African Re is not a company established under Ethiopian law. Ethiopian insurance laws are applicable to us, not to them. So it is up to us, the Ethiopian insurers, to ensure we have fair coverage,” the Executive says.
In a letter dated August 16, 2023, African Re expressed apologies for any inconvenience caused by the suspension but defended the decision as crucial due to the prevailing internal conflicts and states of emergency across parts of Ethiopia.