(Re)insurance companies operating in Africa and various emerging markets continue to face significant challenges amidst a turbulent economic and geopolitical landscape, according to AM Best.
These challenges have been further amplified by external shocks, making resilience a critical trait for industry players.
The declining creditworthiness of many African debt issuers has emerged as a key concern, elevating asset risk and placing stress on the balance sheets of (re)insurers in sub-Saharan Africa.
The ongoing Russia-Ukraine conflict has exacerbated inflationary pressures initiated by COVID-19-related supply chain disruptions, and central banks’ response to contain inflation through interest rate hikes has added to the debt-repayment burden for several African nations.
In the face of these complex economic conditions, sub-Saharan Africa’s reinsurers have demonstrated remarkable resilience. Their underwriting results have remained robust, thanks in part to their enduring focus on local risks.
However, the concentration of business in some of the continent’s largest markets has raised concerns about risk accumulation.
Additionally, (re)insurance companies in these regions continue to grapple with high commodity prices, volatile double-digit inflation, and general macroeconomic deterioration stemming from the aftermath of the COVID-19 pandemic. These challenges have tested their financial strength.
Furthermore, a concerning trend of increasing severity in adverse weather events is altering the natural catastrophe landscape in the region, influencing reinsurers’ risk appetites.
Despite these formidable challenges, (re)insurers in sub-Saharan Africa hold significant growth potential. The region boasts untapped reserves of natural resources, promising long-term economic growth prospects, and a rising insurance penetration rate. These factors position the reinsurance market in sub-Saharan Africa for continued and profitable expansion in the years to come.
As (re)insurance companies navigate this turbulent environment, they must remain vigilant, adapt to evolving risks, and explore opportunities for sustainable growth, the report noted.
