Rating factors gains high recommendation for the motor insurance class of business as opposed to application of flat rate and minimum rates that have been adopted by insurance companies uniformly.
To navigate the best way forward, a brainstorming event was recently held by insurers to upgrade services and products on the insurance business in collaboration with At Insurance Broker and Consultant and Dawit Begashaw Insurance Consultancy, an insurance consultancy based in Canada.
Asseged Gebremedhin, the sector guru and Head of At Insurance Brokerage Consultancy, said that such kinds of events would create alternative to know the level of the sector in Ethiopia and to share lessons from others for the benefit of the sector growth.

Dawit Begashaw, Head of Dawit Begashaw Insurance Consultancy, at the event shared the insurance business experiences in Canada, as well as his vast experience on the sector in Ethiopia prior to doing business in North American.
He underlined that for the insurance sector to be at par with the international standards, brain storming and experience sharing events are crucial in mapping what needs to be done to shift Ethiopia’s insurance business sector.
According to Dawit, with regards to motor class of business or auto insurance as referred to in Canada, is highly backed by technology. On the car underwriting history of driver or the client in connection with driving experience, his claim and insurance practice and experience is built up on the central data base, called ‘auto-plus’, which is a shared service that shall be accessed by all insurers, which helps to rate the premium for a given car insurance client.
Motor vehicle report (MVR) is the other input for the motor insurance that shows conviction report in the recent years including moving violations like speed, traffic light or failing to stop on the scene of an accident.
MVR is a major risk indicator for the insurance company since the driver is at potential risk even though the company may not face a claim.
MVR also has a role for traffic safety since conviction is one of the points for premium rating.
Participants in the meeting expressed that the experience of Canada in relation to motor class of business was the best route to follow by the Ethiopian insurance sector against the new initiative being used.
Further criticism of the latest decision taken by insurance companies on the set minimum premium rate on motor insurance was heavily relayed by the sector participants at the event.
Most of the participants claimed that the government through the regulatory body, National Bank of Ethiopia (NBE), is also drafting a directive that will impose minimum premium on the motor insurance.
They expressed their concern that the new minimum rate whether the one applied by insurance companies uniformly as of November 1, 2022 or that will be applied by NBE in near future, will damage the motive of insurance business in general.
They argued that the newly applied flat rate has generalized clients. They said that rate factors on premium that consider the production date, driving experience and other factors ought to be applied as opposed to generalizing customers at minimum rate.
Such kind of directives that set minimum rate on the motor insurance is not fruitful on

other countries, experts argued. They claimed that the study conducted by the actuarial company, which was assigned by the Association of Ethiopian Insurers, did not cover the required parameters like vehicle type, fleet discount, and a no-claim discount (NCD).
“Now NBE has drafted a minimum rate directive without any study,” they expressed their concern over the perceived challenges to come.
Regarding the regulation in Canada, Dawit showed that the Office of the Superintendent of Financial Institutions is the insurance regulating institution, while there are lower bodies like the Insurance Council that is comprised of insurers and regulation and, Brokers Association, who have roles on the sector operation.
As Dawit cited, the various institutions work in tandem to keep the health of the sector in check, while the federal government regulation body plays a big role on the same. He said that since the sector was established separately in Ethiopia, its mandate should be clear owing to the sensitivity and impact of the sector.
“Besides the independent regulatory body that is governed by the central government, there would be other regulatory bodies like different councils like professional association or brokers association with a clear mandate,” Dawit added.
One of the participants in the capacity building event emphasized that a balanced regulation scheme should be formed as per the experience in the developed market.
According to the expert who now operates in North American insurance business, any agents or advisor that faces customers directly must bear a license, while a back underwriter does not need to be licensed. He also explained that an agent or advisor that is regulated by the independent insurance council have delegated authority from insurance companies to underwrite.
“The broker association is also very strong and has a role to play on the regulation part,” the expert remarked.
Brokers are a big deal and their responsibility is highly esteemed in the sector. Operating with such kind of brokerage schemes has big value for the economy since insurance companies do not expect to open redundant branches like in Ethiopia which incurs unnecessary cost in terms of time and transaction cost.
Brokers have to have underwriting quality and they would also be rated by insurance companies so they have to be prudent regarding loss ratio to be preferred by insurers in order to stay competitive in business.

Top priority is to be given in debt servicing in conjunction with restructuring and tightening regulations on recurrent budget, for the coming financial year, underlines the Ministry of Finance (MoF).
The country’s external debt service is expected to have a sharp rise in the coming years since some of the credit maturity period has drawn closer for payment day.
In the latest meeting with the central government budgetary offices, Finance Minister, Ahmed Shide, emphasized that the coming budget year, 2023/24’s priority agenda will be to settle credit on time.
As the minister explained, no new capital projects will be introduced for the upcoming budget year, “On the recurrent budget, appropriate restructuring and prudent control will be applied.”
He stressed that budgetary offices have to prepare their budget plan on the consideration of resource on hand rather than incoming external loans and grants.
For the past few years, the central government was allocating huge amounts of money from its annual budget for debt servicing. The amount has over the years been growing sharply from time to time owing to some of the huge credit stocks resettlement period.
For instance, in the current budget year that started on July 8, 2022, the government allocated 126 billion birr for domestic and external debt service. The amount has a 179 percent increment compared with 45 billion birr that was allocated for the 2021/22 budget year, for debt servicing.

The 126 billion birr that was allocated for debt service for the 2022/23 budget year took 36.5 percent from the 345 billion birr recurrent budget and 16 percent from the total 786.6 billion birr budget for the year.
Similarly, in the past few years the debt servicing portion has taken the lion’s share in contrast to other sectors.
For instance from the total capital and recurrent budget allocated by the central government, the debt servicing budget now stands at the top with 22.36 percent , followed by defense budget at a 14.9 percent share.
From the total 126 billion birr budget allocation, 56 billion birr was for the settlement of external debt that the country accessed in the past year.
Even though the country showed its strong stand on debt servicing particularly for external creditors, in the past few years the inflow was incomparable with the outflow for debt settlement, which is stated as one of the reasons for hard currency shortage in the country, as per the experience of about three years ago. Other reasons for negative inflow were the refraining of international partners from disbursing the expected loan as promised.
On the meeting held on Wednesday March 15, Ahmed said that public offices should plan their budget proposal on the consideration of financial capability.
He underlined that for the coming budget year, public offices ought to diligently prepare their budget under the maximum limit that MoF provides.
The public external debt settlement that includes the service of state owned enterprises (SOEs), which operate out of the government budget, is expected to increase in the coming year.
According to MoF debt bulletin that evaluates the 2021/22 budget year, the total public debt service payments in 2021/22 was USD 3.2 billion with external debt service standing at USD 2.13 billion or 66 percent of the total.
The total amount of external debt serviced in the last five years including the 2021/22 budget year was USD 9.68 billion. The central government paid about USD 2.05 billion or 21.2 percent of the total external debt service payment to its multilateral and bilateral creditors, as well as interest payments to Eurobond holders, with SOEs paying the remaining 78.8 percent to their respective creditors.
“Over the last four years, the total annual payment for servicing the public sector’s external debt has not changed significantly but SOE external debt service payments has been growing much faster than central government external debt service payments,” the bulletin read.
It added that since most of its external loans have matured, the SOE’s payment for servicing its external debt has increased.
In 2021/22, the total external debt service payments were USD 2.13 billion, “External debt service is expected to rise steadily over the next two years, from around USD 2.1 billion in 2022/23 to USD 2.2 billion in 2023/24, and then to around USD 3.4 billion in 2024/25 due to maturing sovereign bonds.”
At the discussion, Ahmed said that in consideration of the economic condition in its midterm plan that spans from 2023/24-2025/26 budget years, a priority to use resources carefully, servicing of domestic and external debts, and cost minimization and improvement in revenue, is of paramount importance.
MoF’s bulletin forecast signaled that the contribution of SOE external debt service payments to total external debt service is much higher than that of the central government, but it will decline after about six years, “which can be explained by the short-term maturity structure of most SOE borrowing and the absence of non-concessional borrowing by SOE in recent years, except for Ethiopian Airlines.”
In contrast, the central government’s external debt service payments has increased gradually at the start of the projection before increasing sharply in 2024–2025 when the EUROBOND matures with a plateau afterwards.
“Assuming that the committed and undisbursed amounts are disbursed over the next few years, the total estimated external debt service (Principal plus Interest) will rise from USD 2.3 billion in 2022/23 to USD 4.1 billion in 2024/25 due to maturing sovereign bonds, and subsequently fall,” the MoF document explained.
The government is staking different initiative to ease its debt burden, while so far efforts like debt restructuring that is supported by the likes of International Monetary Fund has not taken shape.
Similarly, there is news that some investors on the first Ethiopian Eurobond, raised USD 1 billion in offering maturity extension, meanwhile the government has declined to speak on the matter.

To enhance the fruit and vegetable export through vessel, WoubGet Business Group, a leader on the inland horticulture logistics sector, gears to establish a handling hub at an investment injection of 350 million birr. The procured reefer containers by the Ethiopian Shipping and Logistics (ESL) from China are expected to arrive in the first week of April to accelerate the export of perishable goods.
Ethiopia’s set target to expand fruits and vegetable production and export of the commodities is now taking shape following its backing by sea freight.
The consignment of perishable cargos through vessels is highly recommended since it has a competitive edge in the global market. This, make or break issue has over time been frequently raised by Ethiopian fresh producers and exporters like fruit and vegetable sector actors.

The government, in a bid to tackle the issue has been carrying out different initiatives and several pilot operations to export perishable commodities through vessels that are packed in reefer containers. As part of the initiative, Ethiopian avocados have been exported to the European market, which is expected to expand in the coming seasons.
According to founder and owner of WoubGet, the firm is en route to obtaining the machines to align with the upcoming avocado harvest from the Oromia region and will install its facility adjacent to the Ethio-Djibouti railway line to handle commodities for export.
As Dawit Woubishet, Director of WoubGet Business Group, explains, the firm’s logistic wing, Flowerport Perishable Plc, has been engaged on the transport of flowers from farms to airport for close to two decades. “Prior to that, the Ethiopian Airlines was fully engaged in the handling of the flower export through Tradepath International Plc, which is one of the seven companies under WoubGet, which chartered flights to transport the perishable products to European destinations.”
He said that currently his logistics company handles 70 percent of the inland transport of flower products from farm to airport.
“Throughout time we have developed our capacity to handle the logistics of perishables and now we are transformed to undertake the business a notch higher,” Dawit said.
He said that currently the avocado, banana and other vegetables production is expanding, “So to facilitate the export of the stated commodities it needs additional mode of transport, that is, a vessel. As a result, we are now preparing to start the export in collaboration with Ethiopian Shipping and Logistics (ESL) through railway line to ship via vessels.”
To undertake the new operation reefer container is crucial, while handling facility is a major venture to be established to handle the business, according to the logistics expert.
Dawit explained that the fruits and vegetables development is currently being undertaken through small and differently located cluster farming that needs to be managed as a collective process as per the required standard and quality.
“The facility will unite the collection of commodities to a centralized place where the handling facility will then process and pack the perishables for the shipment,” he elaborated.
Based on Flowerport’s Perishable plan, the handling facility which will have a value adding processing plant will be erected around Mojo adjacent to the dry port.
Dawit said that his company has tabled a 20,000 square meter land request from the Oromia region to install the plant that will have a processing plant and cold chain.
“We are planning to install the plant ahead of the upcoming avocado harvest season that will be in August,” he said.
As per different studies, over 30 percent of agricultural products were damaged on the way to collection and transportation from farm land to market destinations, “the main reason for that is the lack of proper handling, so we are planning to reduce the damage rate.”
The lower damage aspect on product handling shall make the product to be competitive in terms of price, quality and destination.
Currently, the perishable logistics company has 20 reefer trucks but it has also targeted to add another 20 different size trucks including small vehicles that shall collect commodities down to the farm cluster with high quality.
The company which is known as the leader with its cold trucks also targets to buy 10 reefer containers on the aim to accelerate the new coming export commodity that the country designed as a target to be an alternative for the hard currency in the coming years.
The 350 million birr investment is partly financed by the Development Bank of Ethiopia.
So far ESL has established a cold chain at its Mojo Dry Port facility.
Roba Megersa, CEO of ESL, recently told Capital that ESLSE has already facilitated two hectares of a dedicated terminal at Mojo for reefer cargo handling and power plug-in service.

The enterprise has also bought 30 forty feet MGSS reefer containers and mounted generators that are loaded on the Jigjiga vessel is expected to arrive in Djibouti on April 7.
According to Demsew Benti, Public Relations Head at ESL, the procurement has included the all required equipment to operate the cold containers.
The generators are the equipment that will be fixed on vessels to support the cooling process on the voyage of reefer containers to their destinations.
He said that in total, the latest procurement consumed USD 976,500 or USD 32,550 per container.
“We will continue to add more reefer containers in the future,” Demsew told Capital.
The public logistics giant is currently using leased reefer containers for commodities, mostly those at the trial stage.
Recently, Roba expressed that the enterprise is opting to buy the reefer to support the export rather than for revenue-oriented purposes, “This initiative is not for profit-oriented purposes but we want to support the export of perishables.”
Besides the 30 reefer containers, an additional eight are under production stage to be handed over to the logistics enterprise.