For the first time in the Africa Reinsurance Pulse’s survey series, a majority of industry respondents have predicted that reinsurance premiums will grow in-line-with or faster than GDP and that accordingly, penetration may improve.
According to the executives of the reinsurance and brokerage firms operating in Africa, the continent’s reinsurers weathered the economic downturn of 2015 and 2016 remarkably well, as the underlying strengths of Africa’s insurance markets remained unscathed.
An abundance of natural resources, continued population growth, rising affluence and still- unrealised needs for infrastructure investments, as well as digitisation, are expected to drive the growth of assets and re/insurance penetration.
In 2017, Africa’s reinsurance premiums had already increased to an estimated $7.5 billion, up from $6.8 billion in 2016, driven by a strengthening of the major currencies against the U.S dollar.
Although premium volumes contracted during the crisis, most markets remained profitable – albeit with the exception of the continent’s largest market, South Africa.
Africa’s under-penetrated insurance markets continue to attract capital. However, additional capacity is also created by domestic reinsurers, which are set-up to retain more risk nationally, notes the report.
A majority of respondents expect non-African reinsurers to outgrow the regional capacity. As the economy picks up again the large industrial risk exposures, which are ceded internationally, will rebound faster than the smaller domestic risk exposures and thus primarily benefit foreign players.
The report also highlights that personal lines are expected to benefit from the growing size and affluence of Africa’s middle class; higher affordable income translates into rising car sales, property purchases, but also demand for health protection as well as life or savings products.
Meanwhile, technology creates further opportunities as on the back of Africa’s high mobile phone penetration, financial inclusion improves and enables new products in agricultural insurance, credit, as well as in life and health. In commercial lines, investments in infrastructure remain high.
Overall, the report notes that Africa’s reinsurers are cautiously optimistic. During the economic crisis, the continent’s insurance markets contracted but have also proven their resilience. 2017 is expected to be the bottom of the cycle and as pressure on rates and profits ease, the next 12 months will see markets strengthen and gain further momentum throughout 2019.
