Estimates are that on an annual basis, Africa loses over around $500m in premiums to the rest of the world, according to Ms Hope Murera, CEO of ZEP-RE.
In an article in the Standard, she suggests that this can be reduced through the African Continental Free Trade Area (ACFTA) which was founded in 2018 and which heralds an integrated African market that trades with itself first.
Ms Murera said, “Insurance must be an integral part of this. With a potential intercontinental trade of KES400tn ($4tn) according to the World Economic Forum on Africa, the insurance component not only mobilises funds for needed investment, it is the thread for sustainable growth.”
She adds that while most Sub-Saharan Africa economies grow on the back of infrastructure development, insurance contribution has stagnated, and even reversed in some markets.
She says that a lot of what ails the insurance industry is self-inflicted. The sector has witnessed price-undercutting, lack of innovation and fraud, among other ills.
But a lot more is due to the fact that insurance is not integrated in the financial value chain of the economy/ our economies.
At the top, the infrastructure deficit in Sub-Saharan Africa is estimated by the African Development Bank (AfDB) at over $100bn annually. In the past few years, there has been commendable spending on roads, rail, power and ports by African countries.
Business placed overseas
While funding comes from the traditional sources - AfDB and development partners - insurance is mostly placed with European firms.
Increasingly, in most loan contracts with China, a clause has been inserted stipulating, that “all insurance is to be provided by ‘A’ rated Chinese firms”.
“This means that we are externalising hard-earned forex for a service we could have obtained locally and improved the insurance penetration,” said Ms Murera.