By Favour Nnabugwu
Despite the headwinds of currency volatility and inflationary strains in Nigeria and other countries in the continent’s insurance business, foreign reinsurers are falling over themselves to get business from the African markets.
In its annual report on Africa reinsurance markets, A.M.Best, a renowned rating agency says there has been a higher frequency of additional and large claims, as well as increased cost bases together with the need to strengthen reserves given inflationary effects.
“Yet despite this backdrop, the reinsurance market in Sub-Saharan Africa continues to offer growth potential, drawing in overseas reinsurers. Although domestication policies are designed to retain business locally, overseas reinsurers provide capacity and technical expertise. They seek to deploy surplus capital, establish a global footprint and consider the region to be relatively benign from natural catastrophes,” the report stated.
It recalled that the continent’s reinsurers have been affected by slower growth, reflecting challenging economic conditions and subsequently suppressed demand for oil and gas in the past years.
It stated further: “Operating performance has generally been solid for most companies, although it has weakened in the past year, due to economic difficulties. This situation has resulted in less insurable risk in oil and gas producing countries such as Nigeria.
“A notable characteristic of the region is that most primary markets tend to be small and highly saturated. In general, the reinsurance sector is made up of a combination of local and regional participants, with a growing presence of overseas reinsurers. In many of the African markets, the growth of the insurance sector is supported by hydrocarbon discoveries with consequent investments in infrastructure.”