The aftermath of COVID-19 will be a turning point for the entire insurance sector in Africa, according to Tope Smart, who will assume the role of President of the African Insurance Organisation (AIO) next year.
“This is because the insurance sector plays an important role in the economic development of the continent,” Smart said.
“The expected increase in intra-African trade through the AfCFTA will lead to higher insurance penetration across the region. To achieve this goal, the African Insurance Organisation and I will work closely with governments and regulators in the region.”
Delphine Traoré, current President of the AIO, further explained that the world is currently experiencing a global health crisis, the likes of which we have not seen in our lifetime.
“Although the insurance sector in Africa is not out of the woods yet, as you will read in this report, there are good reasons for optimism. The insurance sector remained resilient and worked closely with governments and regulators to cope with the pandemic’s dramatic financial shock,” she said.
“Throughout the pandemic, re/insurance players maintained their operations and deployed their full range of risk solutions, expertise and capital to support African policyholders.”
She expressed the importance of continued dialogue and cooperation with governments, regulators and supervisors in the aftermath of this crisis, as their legislative and regulatory decisions will shape the future of our insurance industry in Africa.
The report from AIO outlined how Africa’s reinsurance market, which largely mirrors the global split in life and non-life premiums, has outperformed the region’s primary insurance markets in recent years.
This is due to reinsurance capacity remaining relatively competitive compared with other forms of capital, such as debt or equity.
In addition, primary insurance markets have been more competitive, due to their focus on personal lines, while the reinsurance segment is able to charge a surplus for their highly specialised expertise in commercial lines.
Furthermore, in Africa as in the rest of the world, rates in commercial lines increased, which led to higher reinsurance growth.
Finally, Africa’s regulators continued to introduce risk-based capital regimes, which often require either higher equity or higher reinsurance cessions.