1.2. Role of Insurance The concept of insurance was born when several individuals exposed to the same hazard decided to get together to form a community of “Insured”. Briefly, insurance is concerned with the spreading of risk - it provides a fund of contributions (termed premiums) by the many, out of which the unfortunate few who suffer losses are compensated. Thus, losses are spread more easily upon the many than heavily upon a few.

The aim of insurance is to make provision against the dangers which beset human life and dealings. People buy Insurance to avert disaster from themselves by shifting possible losses on to the shoulders of others, Insurers, who are willing against a premium to take their risks. In the case of life assurance, for example, the Insurer provides the necessary financial protection to the dependants of the insured or repays the latter’s debts (if any) should he die suddenly.

The extent and nature of coverage will normally be defined in the Policy document issued to the insured, once the risk has been accepted and the appropriate premium paid to the insurer.

The Insurer creates and manages the “fund” of premiums. It is the responsibility of the Insurers (underwriters to be more specific) to ensure equitable contribution in respect of each risk presented to them and assess terms and conditions to be incorporated in the insurance contract.

The underwriters ensure that insurable risks carrying higher probability of losses warrant higher premiums.

The role of Insurance is not only confined to the selling of “a piece of paper” or “an invisible product”, but also of a promise, the benefits of which can only be demonstrated at the time of a claim.

1.3. The Underwriters The underwriters have yet another responsibility, that of fixing the proportion or amount of the sum insured of each individual risk their office is prepared to retain. In order to enable them to accept large risks but limit their liability on each risk to an amount they can retain, having regard to the funds at their disposal and to achieve further spread of losses, Insurers insure the risks again. This practice is called reinsurance. It should be noted that the insureds are not at all involved in a reinsurance contract between the insurer (ceding company) and the reinsurer.

1.4. Benefits of Insurance • Peace of mind Insurance provides peace of mind to the community. Compulsory insurance ensures that legal redress will be available in the event of related loss or damage. • Risk Improvement Expertise and experience are available to assess more skillfully the insured’s risks. • Social benefits Financial stabilisation of business through insurance not only ensures ongoing employment for staff but provides economic advantage to the locality where the business is situated. Equally family protection through life or pension schemes is guaranteed. • Insurers as investors Insurers are substantial wide-ranging investors in business enterprises, house loans, and Government stocks and help to minimise the need to borrow internationally. • General economic overview The existence of a sound insurance market is an essential component of a successful economy. Many economic historians link a sound insurance market with industrial development. • Sponsorship Insurers very often respond spontaneously to sponsor social activities.

1.5. Origin of insurance It is very difficult, not to say impossible, to situate exactly the origin of insurance. However, if we go through the pages of history, we may find evidence that some form of insurance existed even in early Rome, where Romans gathered together in burial societies. They all contributed to a fund and members had their burial costs met by the society.

Furthermore, over 3 000 years ago, some form of community insurance was practised by the Aryan Civilisation. In those days, the loss of profits in industry was insured by cooperative societies.

In India, during the Buddhist period, burial societies existed which were mutual in their character and funds available were also used to help a family by building a house, protecting the widow, marrying the girls, etc.

However, Insurance as a technique of providing protection against fortuitous events for a consideration had its origin in the “Bottomry Bonds” which were issued by the Mediterranean Merchants as early as the 4th Century B.C. Loans were granted on the security of cargo and were called “Respondentia Bonds”.

In the same line of reasoning, the earliest transactions of insurance, as practised today, can be traced to the beginning of the 14th Century in Northern Italy. The Italian merchants, who were engaged in the Mediterranean trade with India and with the European countries by land, originated the practice of breaking up the Bottomry Bonds into two instruments covering separate transactions - the advance of money which was to be repaid on safe arrival of the ship and a policy of assurance which paid the amount stated in the event of loss at sea. This then was the beginning of “Marine Insurance”.

The early history of Marine Insurance is also closely linked up with the origin of Lloyd’s in 1688.

Insurance has evolved throughout the passage of time due to an increasing demand for certain covers, changes in the social and economic environment and legislative measures.

2. HISTORICAL BACKGROUND OF INSURANCE IN MAURITIUS The first insurance company which started operations in Mauritius was the Phoenix Assurance Co. in 1835. A few years later, the Commercial Union entered the market. The first insurance company to be formed by local shareholders was the Mauritius Marine Insurance Co. in 1845. Soon after in 1854, the Mauritius Fire Insurance Co. was created with local funds, and was subsequently taken over by Swan Insurance Co. Ltd.

Life Assurance started around 1858, but it was not until the early fifties that it really showed a serious development. The first local company to transact Life Assurance was the Mauritius Union Assurance Co. in 1948. It is worth mentioning here that the Mauritius Union Assurance Co. is the oldest local company still operating today both in Life and Non-Life fields. It celebrated recently its golden Jubilee.

It was only in 1911 with the advent of the first motor cars that insurers started carrying out motor business and other classes of insurance. By that time a large number of foreign companies became interested in the Mauritian Market. They had no difficulty in finding local representation, through commercial firms. They grew steadily in number and by 1945 there were no less than seventy two Insurers operating in Mauritius, of whom two were local.

Strangely enough, Insurers started offering cyclone cover in the late fifties. It was in 1960 after cyclone CAROL that cyclone insurance was underwritten on a large scale.

A milestone in the insurance industry was certainly the creation in February 1969 of the Reinsurance Company of Mauritius. It started accepting reinsurances from companies worldwide and the business grew steadily. However, owing to inadequate loss reserving, on the one hand and sizeable premiums due by overseas ceding companies remaining unpaid on the other, the Company had to go into voluntary liquidation in June 1983.

As far back as 1939 the need was felt for an Association of Insurers. The Mauritian Accident Insurance Association was formed in July 1939 and it dealt only with motor and workmen’s compensation insurances. However, as the years went by members became disinterested and withdrew their support. The Association was dissolved in 1972.

It was replaced by the Insurance Advisory Council of Mauritius which was formed in 1973. Its name was altered in June 1988 to that of the Insurers’ Association. The objects of the Association are as follows:

a. To unite insurers transacting business in Mauritius; b. To secure the advancement of the business of insurance in the island on a sound basis; c. To create a better understanding of insurance among all sections of the community; d. To afford opportunities for consultation and co-operation in all matters affecting the common interest of members; e. To act as intermediary between the insurance industry and the government or any other organisation on legislative and other matters; f. To promote a code of fair practice by the Insurers transacting business in Mauritius to protect the public; g. To create a better understanding between the public and insurers transacting business in Mauritius; h. To ensure the prompt settlement of disputes between insurers.

3. THE INSURANCE MARKET There are at present 16 members of the Insurers’ Association transacting both Life and General businesses. Such companies are known as composite companies. Two members transact General Business only (i.e. Motor & Non-Motor), and two others Life Business only (Long Term Business). Three local representatives of overseas Reinsurance Companies are also members of the Association.

However, the total number of insurers registered under the Insurance Act presently stands at 26, of which 8 are foreign insurers represented locally.

Over the years, with the breath-taking development in Mauritius, the industry succeeded in keeping pace with the requirements of the market. At present, we have a wide range of insurance products available on the market classified under: Motor, Fire, Marine, Liability, Accident, Engineering, Health and Casualty, Life & Pension.

Contrary to common belief, the role of the insurance industry does not consist in collecting maximum premiums and paying minimum claims. An Insurer is a custodian of his policyholders’ money and his duty is to honour his obligations under the various insurance contracts and thus contribute equitably to the economic development of the country.

4. FUTURE AND PROSPECTS AHEAD The development of the services sector is regarded as the area for future prospects in Mauritius. The insurance industry is no exception. The introduction of innovative products, the sophistication of the market, the advent of a fully automated and computerised society like ours are paving the way for a bright future for the insurance industry.

The emergence of the regional economic blocks like the SADC, IOR, and IOC is presenting Mauritius with new opportunities. On the other hand with the advent of WTO, Mauritius should also be prepared to meet the challenges from other international players.

“The more extensive a man’s knowledge of what has been done, the greater will be his power of what to do.” - Disraeli.

CONTRIBUTORS Mr Michel Thomas, FCII ACI A.r.b., Chartered Insurer, of Swan Insurance Co. Ltd. Mr Gervais Salaün, Bar-at-law, ACII, Chartered Insurer. Mr Cyril Koa Wing of Anglo-Mauritius Assurance Society Ltd. Mr Mario Typhis, ACII, of Mauritian Eagle Insurance Co. Ltd. Mr N. C. Adia, F Inst CM, FCIBA, of Lamco International Insurance Co. Ltd. Mr B. Deelawor, BSc (Hons), of Lamco International Insurance Co. Ltd. Mr Z. Pirbhay, BSc (Hons), of Lamco International Insurance Co. Ltd. Mr S. Dulmeer, BSc (Hons). of Lamco International Insurance Co. Ltd. Mr Roger Tranquille, Secretary, Insurers’ Association.

Source: PROSI Magazine, (N° 364) May 1999

Source: PROSI Magazine, (N° 364) May 1999