Angola's tormented path to petro-diamond led growth

 Introduction - Democracy - Foreign affairs - Finance - Banking - Insurance - Oil industry - Diamonds Industry - Agriculture - Energy & construction - Decentralization - Did you know?


open for business

At independance there were 26 insurance companies of which 12 were foreign. Progressive nationalisations and closures led to the creation in 1978 of the Empresa Nacional de Seguros (ENSA) a state owned monoply that inherited a market worth $53 million in anual premiums of which 5% came from the oil industry.

In February 2000 new insurance legislation (Law 1/100) allowed local and foreign participation in the insurance industry. In January 2001 AAA Seguros (AAA Insurance) was founded putting an end to ENSA's 23 year monopoly. Today the Angolan insurance market is worth an annual $100 million, half of which come from oil industry premiums.

No surprise then that AAA Seguros is part of AAA Financial Services, 90% owned by by state oil giant SONANGOL EP, Angola's largest company and sole concessionary of Angola's mineral rights.

Offshore platform on block in Cabinda

'Sonangol needed a good risk management company capable of controlling and covering its risks' says Sao Vicente, Director of Sonangol's risk management directorate. AAA financial services was the solution. A group of five companies speciliasing in risk management, insurance sales, pension fund management, insurance and re-insurance. The group's total paid out capital amounts to $17.65 million.

By creating AAA Financial Services SONANGOL has introduced integrated risk management services for the first time to Angola's financial sector. The logical clients were the oil companies.'We realised that we were managing an industry in which no risk survey had been conducted even in oil concessions that have up to $5 billion in assets' adds Mr Vicente. The Cabinda Association operated by the Cabinda Golf Oil Company (CABCO) was the first to take advantage of this new service with a survey on exploration blocks 14 and 0. According to Mr. Vicente it is thanks to this survey that AAA handed in the most competitive bid, wining a $15million insurance contract. In February the company was negociating with Total Elf Fina to carry out their second survey on exploration blocks 5 and 6.

'Part of our revenues will always come from the oil industry but that is not where we are going to stop' says Mr Vicente. AAA aims to diversify its services in other sectors such as aviation, telecommunications, war compensation and life insurance. To improve its technical know how and participate in the global re-insurance market, AAA will shortly be opening close on 30% of its capital to a foreign multinational company active in the global re-insurance business. In Mr. Vicente's words'you can't establish a re-insurance company just by insuring your domestic risks. You have to spread your risks geographically and look for opportunities that do not exist locally.'
As Angola's most established insurance company, ENSA has been preparing itself for competition. Criticised for not capitalising sufficiently on its monopoly years, the management points at improvements in the areas of computerisation, human resources, sales and finance departments. In its 1999 annual report the board of directors reported a change in the company's approach to the market:'leaving behind a static routine in favour of creative and dynamic flexibility towards the market and an increase in the level of knowledge of the sales force allowed us to achieve a greater performance in this area, which is in line with the current period of development of the company'.

Indeed ENSA changed its status to reflect the liberalization of the insurance sector. The company is currently restructuring its human resources through training programs in collaboration with American and British insurance companies. For example, last year, the company sent a team to Houston to perfect their knowledge of oil industry insurance, a growing segment of the Angolan market. In addition, ENSA recently completed the computerization of its operations.

Sr. Aleixo Augusto, General Manager of ENSA

As Mr. Augusto Aleixo Chairman of the Board and General Manager of ENSA likes to put it: 'we are taking action with a view to facing up to competition'.

Today ENSA controls the lions share of Angola's insurance market but needs fresh capital, high technology and commercial know how to preserve its lead. Privatization is the solution put forward by the government, which has announced a sell off of 49% of ENSA's capital by the first quarter of 2002.

In 1999 total premium collections from direct insurance amounted to Kz162 million equivalent to $ 28.76 million dollars at the rate of 5,63335 applied by the BNA at the end of 1999. 41% of the premiums came from the petrochemical line of business followed far behind by motor vehicle insurance.

Mr Aleixo points out 'collections for fire cover on industrial premises dropped from a peak of $45 million to a mere $2 million in 1999'. An indication of the impact of war on manufacturing and a revealing figure on the opportunities that lie ahead for the insurance industry. If Angola's insurance market could accommodate 26 companies in 1975 for a total market of $50 million surely there is room for more than 2 insurance companies for a total market now approaching $100 million'.

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© World INvestment NEws, 2002.
This is the electronic edition of the special country report on Angola published in Forbes Global Magazine. February 18th, 2002 Issue.
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