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Africa’s untapped insurance market offers growth prospects —Report

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AFRICA’s relatively untapped insurance market offers a vast opportunity for firms in both mature and emerging-market countries, a report by A.M Best has said.

In its latest report titled “Africa’s Insurance Markets: Gearing Up for Sustained Growth”  A. M Best stated that  Sub-Saharan Africa offers very strong growth potential but accounts for only 0.2 per cent of total global premiums written.

“As a result, insurance groups in Europe, the United States and South Africa have increasingly started looking into emerging markets on the continent in a hunt for better growth prospects because of the maturity of their own markets, where growth is more limited,” the report said.

In addition, the report said that barriers to entry in Africa for large, global insurance groups are very low.
“There are a number of attractive markets for insurers in Africa to consider, including Kenya, Nigeria and Ghana. Kenya’s insurance sector has proved robust and resilient, despite there being many poor households. Premiums have been growing by double digits, fueled mainly by the non-life sector, which makes up 66.2 per cent of total premium written.

Largest population
Nigeria has the continent’s largest population at 174 million, and premiums are expected to nearly quadruple in the next five years to NGN 1 trillion (USD 6.3 billion) from NGN 260 billion in 2012, according to the National Insurance Commission of Nigeria (NAICOM). In Ghana, the life market is estimated to be growing by 40 per cent annually.

Economic growth is supported by oil and gas exploration, political stability and a regulatory system that makes it attractive to businesses. Many large, international insurance groups from developed countries have historically had a presence on the continent.

These include Zurich, with key hub operations in Morocco and South Africa; AXA Group, with a strong presence in Francophone Africa (including Algeria, Cameroon, Gabon, Côte d’Ivoire, Morocco, Mauritius and Senegal); Allianz Group, with a growing presence in 10 African countries, including Ghana, and American International Group, with well-established units in Kenya and Uganda and local partners in most African countries. However, they have become more aggressive in their strategies for expansion on the continent,” the report said.

The report said that the strong foreign interest in Africa’s insurance markets began toward the end of the 20th century, when Munich Re, the world’s largest reinsurer, established regional offices in West and Central Africa to service its clients. Since then, some companies from mature economies have entered the market by either following their clients to Africa, or through partnerships, joint ventures, the acquisition of a stake in an existing insurer on the continent, or by acquiring a new business license directly.

A few of such interests include the the 2005, Sanlam Financial Services Group, owner of Santam, South Africa’s largest general insurer, acquisition of African Life Assurance Co. Ltd.
The group owns significant stakes in insurers in Botswana, Namibia, Zambia, Malawi, Mozambique, Tanzania and Kenya.

In February 2014, Sanlam also acquired a stake in Nigerian stock-exchange-listed Oasis Insurance to penetrate the country’s growing general insurance sector. In 2009, Germany’s Allianz Group was approved for a license by Ghana’s National Insurance Commission (NIC) to operate in the non-life and life sectors and commenced operations. The company seeks to take advantage of the very strong growth and positive fundamentals in the country and has actively expanded its network in Africa.

In December 2013, the United Kingdom’s largest life insurer by market value, Prudential plc, acquired a majority stake in Accra-based Ghanaian insurer Express Life from LeapFrog Investments, a venture capital firm and specialist investor in financial services in Africa and Asia. Despite Express Life’s relatively small size, the deal is considered significant given Prudential’s entry to the market and its vast resources.

In February 2014, London-headquartered specialty insurer Catlin Group said it was considering expanding into territories including Indonesia, Thailand, and Africa. The firm currently has six underwriting hubs in the United States, London, Canada, Bermuda, Europe and Asia Pacific.


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