Here is what Africa needs to do to close the insurance gap for economic and investment development
During a conference by Commercial Risk Africa held in London on the 25th of February 2016 dubbed ‘Sub-Saharan Africa: The Next Generation of Emerging Markets’, Delphine Maïdou, the CEO of Allianz Global Corporate & Specialty (AGCS) in Africa, highlighted opportunities for the corporate and industrial insurance sector in sub-Saharan Africa. Delphine, who is also president of the Insurance Institute of South Africa (IISA) discussed steps the region could take to close the insurance gap, as well as the role of risk management and insurance in infrastructure and economic development.
“With growing economies, sub-Saharan Africa presents a huge potential for business insurance,” Delphine said.
Currently, the world’s insurance industry is dominated by developed countries; the G7 countries, alone, account for almost 65 percent of the world’s insurance premiums even though they cover just over 10 percent of the world’s population. However, the total premiums in Africa for both life and non-life insurance alcame up to a total of US$71.9 billion in 2012, which translates into a penetration rate of 3.65 percent. This figure is well below the global average, which is 6.5 percent, but it is above the average for emerging markets of 2.65 percent.
Despite lower commodity prices and the slowdown of the Chinese economy, as well as strains in some emerging economies, the economy of sub-Saharan Africa is expected to grow by 4 percent in 2016. And although higher borrowing costs are weighing heavily on some of the region’s largest economies, the continent presents significant potential for infrastructure and economic development through foreign direct investment and public-private partnerships. In spite of the challenges, the region remains the fastest growing insurance market after emerging Asia, with insurance premium growth of 4.5 percent to 5 percent predicted for 2016-17.
However, Delphine warned that insurance needs to keep pace with investment and economic development. She also emphasised that local and global brokers and insurers operating in countries that have high insurance penetration such as South Africa, Namibia and Mauritius, need to work with their counterparts in other African countries to foster the use of modern insurance and risk management for businesses within those areas. According to her, Nigeria is a case in point; Africa’s largest country by GDP has a mere 0.6 percent insurance penetration. However, the country has all the ingredients for a thriving insurance industry because of its vast population of about 170 million and an active economy.
According to Delphine, here are two important things Africa needs to do to close the insurance gap:
• Insurers and brokers need to work very closely with risk managers, regulators and stakeholders within the region to create awareness about the purpose and value of insurance so more companies, projects and stakeholders can be adequately protected.
• The continued growth of sub-Saharan Africa depends on closing its vast infrastructure and skills gap, which needs innovative credit and investment solutions facilitated by public private partnerships through a clear policy and legal framework. However, for these solutions to work, they will require equally appropriate risk management and risk transfer solutions – which essentially means increasing insurance penetration.
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