The number of mergers among insurance companies has been relatively small in the CIMA (Inter-African Conference on Insurance Markets) zone, in the lead-up to higher capital requirements on insurers that took effect on 31 May, according to Mr Adama Ndiaye, president of African Federation of Insurance Companies (FANAF).
In an interview with Reussir Business, he said that most insurers preferred to raise their own funds. The number of industry players will certainly decrease, but not in the proportions envisaged at the adoption of the decision to hike capital requirements in April 2016, he said.
Under the new rules, insurers were given a grace period of three years to increase their capital from the previous floor of FCF1bn ($1.7m) to FCF3bn by 31 May 2019. The next step requires them to hike their capital to FCFA5bn by 2021.
He described the capital increase as a good decision which is part of the regulatory objective of promoting a consolidated and integrated market, driven by players of satisfactory size, capable of delivering in a timely manner the services for which they have been licensed.
“The negative image of the insurance industry often stems from the inability of actors, most of whom are small, to cover their management costs and pay claims and benefits on a timely basis,” he added.
He said, “In fact, aside from cultural and socio-economic factors, the main obstacle to the development of insurance in the zone has always been the narrowness of the markets, the size of the farms and the weakness of the means dedicated to innovation and research. Better capitalised and more concentrated companies will certainly be able to devote the financial and human resources needed to improve the density and penetration rate of insurance in the CIMA zone.
“This trajectory has been borrowed by other markets, especially Morocco, it is currently being explored by countries such as Nigeria and Ghana which have significantly increased the capital requirements of insurance companies.”
He pointed out that despite the progress of African insurance in recent years, its weight in global premiums stagnates at less than 1.5%. Correlatively, penetration remains low for the continent at less than 3%. Among other obstacles that delay the growth of insurance in Africa are weak communications, the lack of innovative products adapted to those who need protection, the shortage of insurance talent and the negative image conveyed by slow automobile claim settlements.
The CIMA zone countries are: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Equatorial Guinea, Gabon, Guinea, Ivory Coast, Mali, Niger, Senegal and Togo.