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Insurers in Africa to benefit from economic recovery

Source: Middle East Insurance Review | Jun 2018

Confidence is returning to Africa’s insurance market, according to the third Africa Insurance Barometer launched at the 45th Conference & General Assembly of the African Insurance Organisation (AIO) in Accra, Ghana in May. 
 
   “According to the AIO members polled for this survey, policymakers and regulators pay greater attention to our sector, while consumers have started to realise the benefits insurance offers in protecting their assets,” said Ms Prisca Soares, secretary general of the AIO. 
 
   Insurance premiums in Africa amounted to $60.7bn in 2016, which in US-dollar terms represents a decline over the previous year, she said. However, premium volume in local currency has not declined since 2011. 
 
   Africa’s abundant natural resources, young and growing societies, an expanding middle class and the advent of new technologies are driving insurance demand. The recent economic recovery – though still fragile in some countries – adds further momentum to the continent’s insurance outlook. 
 
   The continent’s low insurance penetration and regulatory framework present market opportunities. The introduction or enactment of compulsory insurance schemes in some markets, as well as tighter capital and solvency requirements contribute to a consolidation and strengthening of the markets. 
 
   However, insurers still wish for regulators to further promote insurance awareness and penetration. Inconsistencies in enforcement and in certain markets a tendency to overregulate and stall business initiatives count as weaknesses, while the surge in protectionism seen in many markets remains a double-edge sword to many insurers. Several global players have reallocated their capacity elsewhere due to low rates and rising costs. 
 
   Africa’s commercial insurance rates seem to have levelled out, but they are expected to increase in the next 12 months, driven by stronger economic growth and regulatory intervention. The profitability of commercial lines still benefits from historically better pricing. In addition, recent claims experience has been low in some markets. 
 
   Personal lines are considered to be more stable. Competitive pressure is less pronounced as brand loyalty is higher than among commercial clients. In motor, there is some pricing pressure due to higher claims, but it is unlikely to move rates broadly. M 
 
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