The COVID-19 pandemic is likely to affect the business of Africa Re for the rest of 2020 and into 2021, according to Mr Corneille Karekezi, CEO of the reinsurer.
He added that it could take months before the insurance industry can fully understand the impact of the pandemic on its business.
In an interview published last month on www.commercialriskonline.com, he said, “We were asked by our board to stress test the possible exposures from the pandemic and they were surprised by our optimism when we reported back earlier this year. However, the problem is that today we don’t know the extent of the damage or the extent of the recovery. And that is the extent of recovery in all those other sectors for which we sell insurance.”
The good news, he believed, is that insurers are generally well capitalised, so they are in a position to survive shocks – anything from an earthquake to a pandemic.
Mr Karekezi predicted that insurers in more mature markets may well face greater problems because of the shape of their books. For example, in Africa (with the exception of South Africa), event cancellation is not commonly sold and nor is business interruption, unless it has a physical damage requirement, which means few COVID-19 events are covered.
The greater risk would arise from premiums lost because businesses might not be operating.
Mr Karekezi said it is also impossible for the insurance sector to start considering re-orienting products or services either, because no one knows what will emerge.
“No one is really working at the moment, so it is hard for us to react. Even something like the agricultural sector has been hit because of a lack of workers.
“The one group that is really working is the IT sector, because they have been in demand like never before as we all work from home,” added Mr Karekezi.
In Nigeria, one of the greatest concerns has been the impact on the oil sector. Prices have plummeted, a situation which not only creates massive issues for the country’s economy as a whole but also brings challenges for the insurance sector.
Mr Karekezi believed that the true impact would begin to emerge when the next renewal season comes around.
Insurers are also employers and it would be some time before they could re-open their offices to anything like business as usual, Mr Karekezi said.
“The risk for us all is actually much higher as we start to re-emerge, than it was when we locked down,” cautioned Mr Karekezi. “For example, for our own business, we cannot afford to return to the office and have someone inadvertently bring in the virus – it risks taking the business down completely.”