The reinsurance landscape across Sub-Saharan Africa is unique, and while economic and political risks continue to pose challenges for market players, the region is still a long-term opportunity for reinsurers, according to A.M. Best.
International financial services ratings agency, A.M. Best, has said that insurance markets across sub-Saharan Africa provides reinsurers with a longer-term view with an opportunity to diversify and achieve revenue growth.
Over the last ten years, sub-Saharan African reinsurers that are rated by A.M. Best have achieved strong growth, with a 10-year compound annual growth rate of gross written premiums of above 7%. A.M. Best notes that this growth has mainly been driven by the non-life insurance segment, with the life business segment in its infancy in many countries.
“Despite uncertain market conditions, the rating fundamentals of the majority of AM Best-rated African reinsurers have been stable. For all of these entities, risk-adjusted capitalisation remains at the strongest level, largely as a consequence of their often underutilised capital bases relative to their low underwriting risk exposures,” explained Tim Prince, director, analytics at A.M. Best.
In recent times, notes A.M. Best, the continued development and industrialisation of the region’s economies, combined with higher insurance penetration, have contributed to the expansion of the region’s reinsurance markets, and the ratings agency expects this to persist.
At the same time, barriers to entry remain high in the majority of African reinsurance markets, underpinned by protectionist local regulations.
Furthermore, the report finds that limitations in the strength of sub-Saharan African reinsurers’ risk management remain an ongoing concern across region.
Prince, added: “AM Best’s enterprise risk management (ERM) assessment of individual companies, which has typically resulted in marginal or weak assessments, takes into account the high-risk management requirements for companies operating in environments with high economic, political, and financial system risk—which, in turn, have negative impacts on the final rating outcome.”