Africa's insurers are expecting further uncertainty for the remainder of 2020 and through 2021, according to the Africa Insurance Pulse 2/2020 report, "Growth perspectives of African re-/insurance markets", launched by the Africa Insurance Organisation (AIO) last week.
Mr Jean Baptiste Ntukamazina, secretary general of AIO, said, “The COVID-19 pandemic has caught the global insurance industry largely unprepared. Those African insurance and reinsurance companies with a strong capital base, and the ability to distribute their products digitally were better equipped to weather the impact of the pandemic. This will enable them to capitalise faster on the business opportunities arising after the crisis."
Following the outbreak of the COVID-19 pandemic, regulatory authorities have given re/insurers more time to cushion the impact from the sudden contraction of the economy. At the same time, they encouraged re/insurers to pay claims promptly. Those re/insurers operating according to risk-based capital regimes were better prepared to deal with the COVID-19 crisis.
Dr Corneille Karekezi, group managing director and CEO of Africa Re, said, “Insurance regulation in Africa has significantly improved in recent years. Various regulators have pushed ahead, mandating the implementation of risk-based capital schemes or capital increases, as well as improved operations and risk management. At the same time, we witness rising protectionist efforts to retain insurance and reinsurance premiums locally. Regulators should assure that in particular in times of economic distress, insurers have access to the highly rated risk capacity and expertise that well-diversified reinsurer provides.”
COVID-19 will change the African insurance landscape & reduce top-line of insurers
Senior executives predict that COVID-19 will lead to an accelerated consolidation of Africa’s insurance industry, eliminating those companies with limited resources and fragile processes. Such a shake-out would strengthen the continent’s insurance markets and benefit policyholders through higher security and a drive for more innovation. Executives expect an improved risk awareness among consumers, leading to higher demand for insurance products.
However, executives are concerned about the impact of COVID-19 on the income of African households. They expect that policyholders will limit their spending and favour savings for fear of a reduction in income or job losses. This, in turn, will affect their insurance purchasing behaviour, ultimately leading to a decrease in premium income.
Mr Andreas Bollmann, partner at Faber Consulting, commented, "Despite the impact from COVID-19, Africa’s insurers and reinsurers remain confident of the fundamental growth potential of their market. They believe that the effects of the pandemic will be offset by an accelerated digital transformation, supportive government and regulatory policies, and increased risk awareness by consumers.”
In 2020, insurers introduced large-scale transformative investments to redefine their core value proposition, optimise operations, update technology and to build a workforce for the future. In 2021 they have to continue on this path of strengthening their competitiveness and thus contributing to a more robust marketplace.
The African Insurance Pulse, which Zurich-based Faber Consulting conducted on behalf of the African Insurance Organisation (AIO), is based on diligent market research and in-depth interviews with 27 insurers, reinsurers and brokers operating in Africa. The interviews were conducted from June to August 2020. The study is sponsored by Africa Re, the leading pan-African reinsurance company and the largest reinsurer in Africa.
Established in 1972 in Mauritius, the AIO is a non-governmental organisation that pursues the objective of developing a healthy insurance and reinsurance industry in Africa and promoting inter-African co-operation in insurance. Currently, the AIO has 362 members, 342 of them from 47 countries in Africa and 15 international associate members from nine countries.