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WILLIS SOUTH AFRICA (PTY) LTD

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Q&A:

W i l l i s S outh A frica

Scott Pickering the CEO of Willis South Africa, one of SA’s largest commercial insurance brokers, tells us how Africa’s vast natural resources and rapidly emerging middle class represent a fantastic growth opportunity.

By Ian Armitage 2

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Willis South Africa focus insurance

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illis has been operating in South Africa since 2000 and is one of the largest commercial brokers in the country. It has some 60 associates and two offices (in Joburg and Cape Town), supported by an international network that stretches across more than 100 countries. Towards the end of 2011, Willis appointed Scott Pickering, Regional CEO of Willis Middle East & Africa, as CEO of Willis South Africa - his task, to align the company with the opportunities Africa has to offer. Mr Pickering, who remains in charge of the wider region, relocated to South Africa in January 2012. “South Africa is attracting investment in mega projects that require the kind of global risk management capabilities that Willis offers, combined with our strong experience in the local market,” he says. I was fortunate enough to ask him a few questions about how the insurance giant aims to tap into Africa’s potential, how the firm is performing and where he sees the company in the future…

Scott, tell me a bit more about your role and remit. You oversee a fair chunk of the business. Do you enjoy the challenge? As regional CEO for Willis’ Middle East and African operations, I am responsible for over 200 Associates in nine offices across the region. In January this year I took on the role of CEO of Willis South Africa, one of the fastest-growing operations in the Group. Willis is one of the leading brokers in the Middle East where we’ve been in partnership with Al Futtaim, one of the region’s top business groups, for almost 35 years. While the world’s focus has been on Asia and Latin America as the key growth areas, I believe that a significant amount of future growth will come from the resourcerich Middle East and African countries. It’s exciting therefore to be part of the “next big thing” and to help position Willis as a leading full-service risk management partner for both domestic and foreign companies looking to expand their footprint throughout the region. The African continent represents a huge opportunity for Willis. Tell me more? Our next emerging market target is Africa. We are working with our Associate Company Gras Savoye, the leading French www.southafricamag.com

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Willis South Africa focus insurance

We see significant opportunities in the power (including renewable energy) industry in Southern Africa

broker (of which Willis owns 33.3 percent), to grow our joint African footprint that already covers 23 countries on the continent. Gras Savoye has a very strong presence in the Francophone countries and Willis has a well-established operation in South Africa including a number of correspondent offices in the rest of Africa. Between us we’re looking to maximise on opportunities from our existing branches and fill in the gaps business-wise across the rest of Africa. We see significant opportunities in the power (including renewable energy) industry in Southern Africa, agriculture in East Africa and mining in West Africa, amongst others. 4

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Construction associated with infrastructure development is also another big growth area throughout Africa. According to the African Development Bank, the number of middle-class consumers in Africa has grown 60 percent over the past decade to 313 million, a growth curve that’s on par with the Chinese and Indian middle classes. These people will be looking to protect their newfound wealth and this presents an unprecedented opportunity for the insurance industry. All these businesses will be seeking more and more risk management services as they expand, which is why we are so focused on further developing our African strategy.

Do you see South Africa as a sort of gateway to all this? South Africa is one of our fastest-growing operations globally and with the country being seen as the gateway to Africa, we see huge potential here. Global investors are taking notice of the burgeoning African middle class and several big brands including Wal-Mart, KFC’s owner Yum Brands, Ford Motor and Vodafone have set up shop in South Africa as a springboard into the continent. As the dominant market in Africa, accounting for 90 percent of regional life premium volume and half of the regional non-life premium volume, the South African insurance market is ideally positioned to provide


Willis South Africa focus insurance

the insurance and risk management solutions to help facilitate the African expansion plans of both global and domestic companies. So we are glad to have such a strong base in South Africa with the necessary solid insurer relationships to help our clients with their risk management needs. Of course, it’s not just multinationals that we’re focusing on – we see great potential in the domestic market too. The country has abundant natural resources and mining is a big coverage area. But it’s not just the commodity sector that is experiencing growth: retail, telecommunications, construction, manufacturing and banking are also expanding and need the kind of local risk management expertise backed by the resources and knowledge of a global broker that Willis can deliver. What are your plans for the local market? Property and casualty programmes form the basis of our business today together with marine, aviation, energy and construction placements. 6

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We have traditionally targeted large blue chip accounts from the top 100 JSE-listed companies, many with international and African operations. A lot of our business also comes from government and parastatals. Four of the top 10 JSE-listed companies are our clients along with two of the largest state-owned companies. We are looking to diversify our business in the future focusing on midmarket and SME market segments. To do so we will be looking to leverage best practices and sales tools from within the Willis Group globally. We are investing in new capabilities in mining and financial and executive risks and have set up a renewable energy practice in Cape Town. We’ve also expanded our risk engineering team - a group of engineers who travel the world to assess the risks in our clients’ operations, so that we can devise the


D&O Liability: More than just dirty water Acid mine drainage (AMD) is the mining industry’s greatest environmental challenge and its greatest liability. An acid-generating mine has the potential for long-term, devastating impacts. Recent media coverage on the outflows of water from abandoned or decommissioned gold mines in the Wits basin and the disused coal workings of the Mpumulanga Highveld, show that thousands of liters of highly acidic, metal and sulphate-enriched water is decanting into river systems from underground workings and tailing dumps. Groundwater is also being contaminated. It’s a major problem. The government and the mining industry have been forced to act and a government commissioned study on risk mitigation and water treatment was presented to parliament on February 21, 2011. The report suggested that current mine owners should be approached to contribute to fund operational costs, but there is still disagreement about who is responsible for dewatering defunct mines and treating the polluted water. Treating the water to acceptable standards and selling it to local water utilities as a means of cost recovery has been suggested as a sustainable solution. Clearly, the consequences of doing nothing will result in ever expanding environmental problems ending up in the headwaters of the major river catchments including the Vaal River. But still the question remains: If the present day challenges are as a result of a century of mining and dumping of waste material, why should the current directors feel concerned? After all, they did not start the process. Directors can be held personally liable if a director knowingly allows his or her company to pollute the environment by illegally disposing of waste. This could have serious repercussions. The risk is increased in cases

where no action is taken but not in cases where a company has followed a particular course of action. The trend of recent legislation is to hold directors and officers personally liable for damages in cases involving either their action or inaction. Several environmental statutes specifically make a director personally liable for a crime. As with public liability policies, pollution is generally excluded from directors and officers (D&O) liability insurance policies. Even when pollution cover is bought as an extension to the standard policy, the cover will still usually exclude fines and penalties, known pollution conditions, intentional or willful misconduct, clean-up costs and first and third party liability. Since the mining industry has been aware of AMD and the implications thereof for some years now, it is most unlikely that they will be able to buy an insurance policy to cover the risks they now face, unless they can demonstrate to underwriters that they have implemented strict risk management procedures to minimise their risk. These would include demonstrating good corporate citizenship by having policies and procedures in place that seek to curtail air and water pollution, conserve energy, market safe products, pay for any damage to the environment and regularly report progress to shareholders. They will also need to work closely with the various government departments where appropriate. We must keep in mind that South Africa as a developing country is developing water scarcity and pollution of the water resources we have, multiplies that scarcity. It is of vital importance that a sustainable solution is found for all our sakes. Visit: www.willis.co.za

appropriate insurance or mitigation solutions. Are you seeing results? We’re third out of all Willis’ international offices (outside the US and UK) when it comes to new business wins, winning 82 percent of all new tenders that we participated in 2011. Our client retention rate is 95 percent. 2012 has continued to build this positive momentum. The South African insurance market is very innovative and flexible and capacity is plentiful even for the most complex risks. The market is very competitive with large globals and strong local regional players on both the

We are investing in new capabilities in mining and financial and executive risks and have set up a renewable energy practice

brokerage and insurer side. Like most markets around the world, a soft insurance environment prevails and risks are generally very competitively priced. Willis is one of the largest brokers in South Africa. Of course, our aim is to be number one, but we see our current position as an advantage in that we’re smaller, more nimble and ready to jump at opportunities that come our way. What trends are you seeing in the insurance market locally? How are you adapting to those? New products? Like their BRICS counterparts, South African risk managers, particularly www.southafricamag.com

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Willis South Africa focus insurance

We are investing in new capabilities in mining and financial and executive risks and have set up a renewable energy practice in Cape Town

those in companies with African or international expansion plans, are interested in insurance solutions that protect their companies against risks like supply chain disruption, political instability and expropriation, and kidnap and ransom. While political risk and K&R coverage are very well established products, the insurance industry is working hard to create innovative products to protect clients against heightened risk exposures such as Contingent Business Interruption. One area of innovation that Willis Group is leading the way on involves tackling the piracy problem in the Gulf of Aden. Willis introduced a unique anti-piracy insurance solution called Vessel Shield™, which gives ships’ masters real time advice to help them navigate dangerous waters. No ship using Vessel Shield™ has been hijacked. Locally, the South African government’s commitment to adding 3,725 MW of green energy to the national grid by 2016 will see investment of 100 billion rand in the renewables sector. Getting the right insurance in place for these investors is integral to the success of these projects and Willis SA’s fledgling renewables team is fortunate 10

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Q&A:

Gary Corke, Emerald Risk Transfer Q: In a nutshell, who are Emerald Risk Transfer?

always a concern we do not have some of the

Emerald Risk Transfer are one of the largest

inherent risks associated with other regions.

suppliers of corporate property and affiliated engineering risk insurance solutions on the

Q: When did you first work with Willis?

African continent.

My first job was in Ipswich, England with Guardian Royal Exchange and their office

Q: Which segments of the market do you operate in?

was directly opposite the infamous BlackGlass

Essentially all the larger retail industrial and mining

building of Willis. In fact, I nearly joined that

companies within South Africa, but in recent years

very same office in 1981.

our footprint into the rest of Africa has grown. Q: What do they provide/do you provide to them? Q: How are you performing?

I believe the relationship between Willis and

Thanks to a mixture of hard work, good fortune

Emerald is symbiotic. We offer each other

and good risk selection, very well. This year,

solutions. Willis have a host of large industrial

like those before it, has proven profitable for

and mining clients that require corporate property

our shareholders.

and engineering solutions that we try to provide. We have a host of facultative reinsurance

Q: How can you improve?

requirements that they in return try to help us with.

There is always room for improvement, but I suspect our improvement of relationships with our customers

Q: Do you have a strong working relationship?

have been the most pleasing aspect of our year.

Absolutely. We are people centric and a number of people within Willis Group I regard as

Q: How would you sum up the current state of the

friends away from work. Suitably, my colleagues

industry?

at Emerald have some long-term relationships

The biggest uncertainty for me, and the area I

that have been robust enough to withstand the

have least control over, is the global economy

odd work related problem.

and the effect it has on reinsurers security and reinsurance capacity. The credit risk that

Q: Are you looking forward to continuing working

our reinsurers bring to our balance sheet is a

with them in the future?

concern and one we try to keep an eye on.

Willis are a fundamental part of our strategic thrust, and I certainly hope to work with Willis

Q: Are there lots of opportunities for the company?

for some considerable time.

There are many. Corporate South Africa has, compared to many other regions, performed well.

Q: Finally, what do you believe is the key to

The resources of the African continent create

Emerald’s success?

unique opportunities for investment. Thankfully,

Good people. At Board level, within our staff

our region does not have the catastrophe issues

compliment, our reinsurers, our intermediaries,

associated with North America, Australia, New

and our policyholders. We are a people

Zealand, Japan, Chili, New Zealand and others.

centric organisation, and good people deal

Whilst risk management on our continent is

with good people. www.southafricamag.com 11


Willis South Africa focus insurance

AGCS South Africa South Africa officially joined Allianz Global Corporate & Specialty in January 2010.

Pictured, left to right: Scott Pickering, Peter Moyo (Chairman, Willis South Africa), Joe Plumeri (Willis Group Chairman & CEO) and Tim Wright (CEO, Willis International)

The insurance industry is working hard to create innovative products to protect clients against heightened risk exposures such as Contingent Business Interruption

The Allianz involvement in the South African market began with the acquisition of Shield Insurance Co. in 1981, offering personal, commercial and corporate insurance and continued until 2002. Allianz re-entered the South African market in 2004 to service international insurance programs (IIPs) and selectively target South Africa domiciled corporate clients. As part of the expansion of the AGCS footprint, the South Africa operation has been transferred from Allianz SE to AGCS AG at the beginning of 2010. We are now offering property, financial lines, engineering, marine cargo and general aviation insurance from our South Africa office. We also provide access to all complementary products and services of the Allianz Group – via its network in over 150 countries - as well as specialist risk consulting support.

to be in a position where we can draw on the expertise and knowledge of our London renewables team who are leading the way in Europe. It was fascinating talking with Scott and getting a real glimpse into Willis SA’s future. The African continent is “not for sissy’s” but is a “continent full of unparalleled opportunity.” With patience and the right strategies, “businesses have the real ability to achieve sustainable” longterm growth, he says. “I truly believe it is Africa’s time and it is exciting to be living and working here right now.” To learn more visit www.willis.co.za.

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