The African Insurance Organisation (AIO) has reported that insurers and reinsurers are confident about the current outlook for their industry as the continent’s gradual economic recovery looks set to positively impact rates and earnings, and to ease the pressure of excess capacity and competition.
The AIO’s 3rd African Insurance Barometer, which polled re/insurers at the Organisation’s 45th Conference & General Assembly in Accra, Ghana, found that companies were more optimistic than in preceding years, due to visible improvement in the continent’s economy.
Africa’s insurance markets continue to benefit from abundant natural resources, young and growing societies, an expanding middle class, and the advent of new technologies, all of which are driving re/insurance demand.
The continent’s current low insurance penetration also presents a huge opportunity, and re/insurers have begun to broaden their product offerings and widen their distribution to meet demand, using new technologies to bridge geographical distances and increase scale.
Additionally, Africa’s regulatory framework was, for the first time, rated favourably by a majority of interviewees, with regulators now aiming to protect domestic insurers from foreign competition with higher barriers of entry while rates are low.
However, there remain significant challenges to the market, with excess capacity and fierce competition still widespread, and inconsistencies in regulatory enforcement and overregulation still presenting issues.
Prisca Soares, Secretary General of the AIO, said: “This year’s Africa Insurance Barometer demonstrates that confidence is returning to Africa’s insurance markets. According to the AIO members polled for this survey, policymakers and regulators pay greater attention to our sector while consumers have started to realise the benefits insurance offers in protecting their assets.
“With the advent of new technologies and the ambition of our industry to create and deliver tailored products to clients, our relevance as a key sector for the prosperity and progress of Africa’s economies has greatly improved.”
The survey also found that a growing number of executives are expecting rate increases over the next 12 months due to stronger economic growth and regulatory support.
Additionally, respondents no longer assumed that non-African re/insurers would outgrow their African counterparts, as increased protectionism and low rates are making it costlier for foreign players to increase their African footprint.
African re/insurers have also reportedly been overcoming widespread lack of awareness of insurance across the continent by investing heavily in marketing, and are overcoming other barriers to market entry by better integrating new technologies.
