Nigeria lags behind as South Africa gets 69% of Africa’s $74.2b insurance market The Nation Newspaper

Africa’s gross premium composition is skewed towards South Africa at 69 per cent of market share, a report from the African Insurance Organization (AIO) has shown.

With Africa’s insurance penetration estimated at 2.7 per cent, average global insurance penetration figures are 3.9 per cent for life and 3.0 per cent for non-life business.

Nigeria still ranks lower than South Africa in insurance penetration with the latter penetration standing on fourth position on a global scale at 12.2 per cent.

Out of the 20 biggest primary insurers in Africa, 15 are from South Africa and five are from Morocco.

The Nation found that Nigeria ranks number 24 with Leadway Assurance Limited emerging as the biggest in the country’s insurance sector.

It is worthy of note that Nigeria’s low ranking of the insurance sector compared to South Africa, Morocco and Egypt is as a result of the separation of pension product portfolio from insurance in the country.

Global average insurance density of $382 stands for life business and $492 for non-life business, greater than at least 19 African countries.

Besides, the African insurance market is estimated to be around $74.2 billion gross premiums in 2021.

This compares to global premiums of $6.86 trillion in 2021 compared to $6.29trillion in 2020 with Africa having 1.1 per cent share.

Global life premiums are measured at $3.0 trillion in the period under review compared to $2.7 trillion in the previous year and global non-life gross premiums at $3.9 trillion compared to $3.6 trillion in the previous year.

The Sector Head Insurance Ratings at GCR Ratings, Godfrey Chingono in a paper presentation on “Strengthening the Regulatory Environment in Africa to Support Innovation and Growth” during the AIO Reinsurance Forum explained that the product space in Africa is varied but not as expansive as that in the developed markets.

He stated that the gap analysis starts with that between South Africa and the rest of Africa.

He added that the catching up by other countries starts with analyzing structures in South Africa that drive higher levels of insurance penetration that are portable to other markets.

He said Nigeria and other countries need to focus on products like Credit, Agriculture; bond and guarantees; and other specialist risks.

Chingono disclosed that the overview of market characteristics and product structures that are in South Africa relative to other markets include high income per capita of USD6,954 in 2021 using International Monetary Fund (IMF) data.

He said it also includes high levels of insurance awareness underpinning demand for motor risks, noting that there is no compulsory 3rd party insurance in South Africa as it is in Nigeria and some other countries.

Speaking on channel structures, he said there is need to use Underwriting Management Agencies (“UMAs”) in driving uptake of specialist risks.

He said: “There is also need for high visibility of alternative risk transfer solutions to deal with different levels of risk transfer.

The non-life cell captive market in South Africa closed in revenue of ZAR20.4 billion in 2022, size of a top 10 market in Africa, equivalent to about 12 per cent of total non-life gross premiums.

“There is need for growth in the uptake of credit life products that are embedded with sales, high proportion of investment products with no or little participation features. There is also a need to focus on products like Credit, Agriculture; bond and guarantees; and other specialist risks.

Chingono noted that besides the weak nexus with growth, there are instances where regulation crowds in insurance opportunities.

“Examples of where regulation crowds in insurance opportunities are in the area of ​​compulsory insurance on motor 3rd party, marine, property, health and workers’ compensation. Others are compulsory group life cover or credit life cover on credit products.

“These interventions directly increase gross premium growth. However, this grows out in subsequent years. Currently, risk-based supervision is major regulation in the market. At least nine markets in Africa have adopted or are in the process of adopting risk-based supervision. Not all RBS models are created equal because there is proportionality in some markets.

“Few insurers have developed regulator-approved internal models. Overall culture of risk awareness is improving as solvency ratios are being embedded in strategic planning.

He said: “South Africa registered positive growth relative to the economy over three of the four years. Proactive regulation drives confidence.

Kenya underperformed the economy over the entire four-year period. Largely due to price undercutting. RBS has not curtailed the practice.

Other markets including Nigeria are in the middle”, he pointed out.

Casualty optional underwriter at Munich Re of Africa, Nkejane Mofokeng, said the overall market environment challenges insurance industry shows capacity tweaks in the market with inflation increasing concern about pricing adequacy.

He said recent years showed high losses from non-peak perils and unexpected events like pandemic and war in Ukraine.

He added that cyber risks have increased with strict focus on stand-alone profitability, shaping the market as a market leader.

Deputy Managing Director, Africa Re, Mr. Ken Aghoghovbia on his part said that as priorities are being pursued, African reinsurers and insurers must be mindful of the need for sustainability. In effect, the reinsurance and insurance industry needs to adopt applicable legislation, policies and guidelines that aligns with global and continental initiatives as outlined in the Sustainable Development Goals and the African Union 2063 agenda respectively.

“We should also have a clear focus on innovation, collaboration and sensitization of stakeholders on the endless possibilities that reinsurance and insurance offers for protection. I urge every one of us to challenge ourselves to do more in this regard.

“As reinsurers, we offer an important complementary service to the stability, solvency and sustainability of not only the primary insurance market, but also the economy at large”, he added.

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