Insurance

Africa’s reinsurance market expected to grow despite challenges

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Africa’s reinsurance markets are expected to benefit from strong underlying growth driven by an expansion of its primary markets with insurance premiums reaching $64 billion.

This is according to an annual survey, ‘Africa Reinsurance Pulse’, conducted by Dr Schanz, Alms & Company and facilitated by Africa Re.

Based an abundance of natural resources, the need for infrastructure investments, the emergence of an expanding middle class and a still young and growing population, the region’s GDP is expected to increase by roughly 4 percent per annum from 2016 to 2020, ahead of the world’s average growth rate of 3.6 percent for the period.

Furthermore, the report suggests the low insurance penetration of 2.9 percent in Africa, as a share of insurance premiums to GDP, indicates the large potential of the continent in catching up with the global average of 6.23 percent for 2015.

“More than 90 percent of Africa’s insurance companies have only been created in the past 40 years,” said Corneille Karekezi, group managing director and CEO of Africa Re.

“As a result, our industry still has to build the awareness for the benefits of protecting and enabling economic progress. The Africa Reinsurance Pulse provides succinct data and information on our continent’s reinsurance markets and contributes to this goal as it demonstrates our industry’s potential and also its challenges.”

The survey found that larger and more complex risks are arising, requiring insurance protection while the broader African middle class is eager to protect its assets and make provisions for the future.

The identified weaknesses in the market included lack of access to local expertise, reliable data and statistics.

Furthermore, frequent foreign exchange trading restrictions and the vulnerability of fragmented and relatively small markets to sudden swings in export demand, commodity prices and exchange rates fluctuations may result in unwanted volatility.

Political instability was also identified as the biggest threat to the region’s insurance and reinsurance markets, strongly affecting growth expectations.

From the survey, the majority of interviewees felt that current reinsurance rates are below the average of the last three years, however global markets are still perceived as profitable due to stable loss ratios and the region’s limited exposure to natural catastrophes.

As new capacity enters the market and reinsures deploy additional capacity to both new and established markets, profitability is expected to come under pressure.

Furthermore, domestic capacity is expected to outgrow international capacity in the near term.

Africa Re, Insurance, Reinsurance, Africa, Schanz Alms & Co

Intelligent Insurer

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