Significant opportunities in Africa’s insurance markets

Strong cross-border activity with Africa-based insurance groups buying other regional insurance companies is creating attractive opportunities for US and European re/insurers, says AM Best.

According to the rating agency’s report Africa’s Insurance Markets: Gearing Up for Sustained Growth, a number of the 54 African economies are growing between 5 to 10 percent, with drivers such as energy, construction and mining projects fuelling the growth.

“There are significant opportunities for direct insurers and reinsurers in key markets in Africa, particularly in fast-developing sub-Saharan markets such as Kenya, Nigeria and Ghana. However, companies need to stay focused on the economic and regulatory environment, given the diversity of markets on the continent,” said the report.

Despite strong average GDP growth for the continent overall, many insurance markets in Africa are small by international standards.

Deniese Imoukhuede, associate director, analytics, said: “Insurance penetration, while growing, is low at less than 1 percent overall, and insurers have faced challenges that include political risks, greater competition and increases in minimum capital levels. However, from June 2011 to June 2012, 28 out of 46 governments in sub-Saharan Africa implemented at least one regulatory reform, making it easier to do business.”

Africa’s insurers and reinsurers are poised to benefit from strong economic activity on the continent.

Dr Edem Kuenyehia, associate director, market development and communications, added: “There are significant opportunities for direct insurers and reinsurers in key markets in Africa, particularly in fast-developing sub-Saharan markets such as Kenya, Nigeria and Ghana. However, companies need to stay focused on the economic and regulatory environment, given the diversity of markets on the continent.”