The 2nd African Insurance Barometer reveals an expectation across the market of accelerated premium growth, which is anticipated to outpace GDP. However, an inability to attract needed talent and concerns surrounding the continent’s regulatory environment continues to dampen growth prospects.
This year’s African Insurance Barometer includes responses from 29 regional and global senior executives across the insurance, reinsurance and broker community, providing a detailed look at the US$64 billion African insurance industry, and was presented at the 44th AIO Conference & General Assembly in Kampala, Uganda.
“The executives interviewed for this year’s edition expect the underlying market fundamentals to prevail over the economic decline that many markets witnessed in 2016. A majority of our interviewees assume that premiums will outgrow GDP.
“Africa’s insurance penetration, which currently stands at 2.9% or less than half of the global average will translate into accelerated premium growth – provided global demand and commodity prices continue to bounce back in 2017 and 2018,” said Prisca Soares, Secretary General of the African Insurance Organisation.
Supporting greater insurance penetration in Africa is technology, finds the report, which is enabling a wider range of solutions to reach a broader scope of individuals via mobile phones and the Internet, a trend which is supported by the rising middle class.
For reinsurers, both regional and international, greater insurance penetration suggests increased demand for reinsurance protection as companies look to hedge some of their growing exposure. And, at the same time, capital requirements remain weak across Africa, and as the regulatory landscape continues to advance and evolve this too could stimulate additional reinsurance demand in the region.
Generally, participants of the 2nd African Insurance Barometer expressed optimism with the African insurance market, but an inability to attract talent and the regulatory environment continues to hinder the region’s development.
According to the report, 70% of interviewees highlighted access to local skills and talent as a challenge for the African insurance industry, which ultimately limits the ability to introduce new, innovative products and distribution channels.
As a result, the majority of capital is invested in mainstream solutions which is fuelling intense competition and which is exacerbated by regulatory pressure and economic turmoil.
Insurance and reinsurance industry regulation across Africa has improved in recent times, but interviewees explained that a lack of expertise and human resources continues to hinder development.
“Overregulation is a concern too as supranational insurers complain about rising protectionism while national players demand a regulatory approach that facilitates rather than restricts market growth,” explains the report.
The development of new, innovative and adequate solutions across Africa is clearly an opportunity for insurers and reinsurers both regional to Africa and international, but as with many emerging markets it’s important the regulatory environment is suitable. Interviewees appear more upbeat on the region’s re/insurance market prospects than seen in the previous two years, but access to talent and regulatory issues clearly remain a hot industry topic and should be addressed to ensure the market can flourish.
