As African Insurers Strategise to Address Growth Challenges

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Issues bordering on new strategies to address the impediments to market growth topped agenda at the 43rd African Insurance Organsation’s conference in Marrakech, Morocco, writes Ebere Nwoji

Insurance Managers across Africa, at the just concluded 43rd African Insurance Organisation Conference and General Assembly went into a serious brainstorming session on how to re-strategise and address numerous challenges plaguing the growth of the sub-regional insurance market.

At the conference, which took place in Marrakech, Morocco, it was reported that the region’s premium generation decreased from $72 billion in 2013 to $69 billion in 2014.

However, AIO members present at the conference, expressed strong belief that despite terrorism and political turbulence in the region, there is still high hope for insurance business as available indices show good growth forecast for the regional market.

Evidence of this as pointed out by the organisation at the conference is the level of interest of other continents in Africa’s insurance market.
In Nigeria alone, a lot of overseas insurers have shown interest in insurance market through investments and intending investments in the existing insurance firms.

The highlight of this year’s edition of the conference themed “African Insurance Amidst Current and Emerging Challenges” was the launch of the multimillion-dollar African Insurance Barometer, which stands as the biggest study of its kind ever undertaken on the African continent. The study showed that insurance premiums in the market are expected to grow at similar pace with the continent’s GDP but noted that there is dearth of skill in the market, a situation that has continued to threaten growth of the market.

Discussants at the conference noted that premium from Africa, represents only 1.1 percent of the world’s GDP but noted that there is need for the continent to at least contribute 2 percent to the world’s GDP.
They noted that most operators in the countries within the region have weak capital base and urged the supervisory authorities to work towards harmonising the operators.

They also urged insurers and reinsurers within the region to partner and work for the growth of the market.
The conference noted that 85 percent of African insurance premium comes from South Africa and that size of South African market is 36 times the size of the second to the largest market in the region, which is Morocco.

The conference listed key priorities to advance the regional market as improved access to financial literacy and regulatory reforms in the area of harmonsation of operators’ activities, development of products that are more relevant to the people especially micro insurance for low income people among others.

Sectoral reports of operators’ activities at the conference, revealed that insurance operators within the region are yet to raise their heads above waters in underwriting of major technical lines of businesses.
The reports showed that, the operators, have continued to lose major businesses to their counterparts in foreign markets due to lack of technical capacity and other related factors, while profit margin and premium income have continued to nosedive in recent times.

The region, has in the past five years, recorded losses in core technical businesses like aviation and oil and gas businesses, a situation, which they blamed on lack of support to each other by their various counterparts and preference of big business operators in the region to insure abroad instead of within the region.

In the 2016 Annual review of AIO, released at the conference, the African Aviation Insurance pool, a consortium of countries underwriting aviation insurance, said the pool’s premium income in 2O15, dropped by 40 percent.
Similar experience was shared by the oil and gas pool although there was slight improvement in the pool’s income in 2013.

Immediate past president of AIO, Mrs. Lamai Ben Mahmoud, who presided over the conference, expressed regret that despite the crucial nature of insurance to modern and stable economy, the sector has remained underdeveloped in most countries of the region. She said because of this important role played by insurance, developed countries of the world occupy predominant position in the market while African market occupy lower position.

“This weakness is even more apparent regarding our African countries with a modest share not exceeding 1.4% of total premiums written in the world and a low penetration in the economy with a premium/GDP ratio not exceeding 1% in some countries, below the average rate of 2.7% recorded in 2014 for the entire continent.”

Mahmoud therefore charged Insurers and Reinsurers in the region, to develop a solid partnership that can help improve access to insurance services as well as build a strong and complementary African insurance industry notwithstanding the economic difficulties experienced by most countries in the region.

She said the 43rd edition of the conference is in pursuance of the regional insurers’ reflections on how to boost the insurance sector in Africa not just for economic growth but most especially to better the lives of the citizens of the continent.

She said this has become necessary because despite disturbing scenarios in some parts of the continent, were evidence that the future is not all that bleak.
She said, despite the opportunities in the regional market, the insurance sector in Africa is facing a lot of challenges, which the operators must surmount to attain the present height occupied by developed world’s insurance market.

She identified some of the challenges saying in the continent, insurance penetration is still a hard nut to crack.
“The share of insurance premiums as a percentage of GDP has remained exceptionally low. In some countries, it only amounts to less than 1%, well below the global emerging market average of 2.7% in 2014, while Africa’s share of the global insurance market is 1.1% for Non-Life and 1.8% for Life but this is a demonstration of the enormous growth potential within the industry, an indicator that the insurance market is still widely untapped.

She said in order to insure Africa’s future, operators must devise strategies aimed at facing the continent’s numerous challenges today.
She listed more of the challenge as recent drop in fuel prices, cyber criminality, political instability, insecurity with some new waves of terrorist attacks, climate change, food security challenges for the continent’s population tomorrow among others.

According to her, added to this is problem of shortage of skilled and experienced insurance professionals which she said has resulted in large and complex risks not being retained within Africa, but are ceded to foreign insurance markets because specialist risk management capabilities and high quality security are not sufficiently available leading to a consequent premium flight which threatens the viability of the domestic insurance industry.

Highlighting more of the challenges, the AIO boss stated: “Moreover, there is still wide spread ignorance on the benefits of insurance. Added to this list is an acute insufficiency of product differentiation.
She said to address these challenges, every company should continue to act to promote expertise.

“We emphasise in this area on the need to strengthen the diversification of training in scientific and technical issues by leveraging new tools and instruments imposed by the development of technology to ensure greater communication of their knowledge and know-how.”

The AIO, established in 1972, is a non – governmental organisation recognised by many African governments including Cameroun which has signed a headquarters agreement with it and where it has set up its permanent secretariat. It has 371 members, 363 of them from 47 countries in Africa and 13 associate international members from seven countries.

Its membership is open to the insurance industry, regulatory/supervisory authorities, insurance training centers and National and regional associations.
Its main objectives are development of a healthy insurance and reinsurance industry and the promotion of inter- African co-operation in Africa.