Chiamaka Ajeamo
Declining rates and raising claims from insured clients coupled with the continent’s tough business was a major talking point for Africa’s reinsurance executives who expressed concerns over the impact of declining rates and rising claims pressure on the profitability of the reinsurance markets with premium volume of about $ 7.5 billion.
A recent report and the 4th edition of the Africa Reinsurance Pulse, published at the 24th African Reinsurance Forum in Tunis, Tunisiaraised the concern on Africa’s slowly recovering economies from the commodity crisis of 2016.
In highlighting the continent’s vulnerability to external shocks, the reinsurance executives showed concern about the current outlook in the light of renewed economic and political uncertainties.
The report however noted that, the senior executives of Africa’s leading brokers and reinsurers interviewed also expect that the inflow of excess capacity from advanced markets into the continent has finally come to a standstill. Insured values, as well as premiums, might benefit from the current economic growth and outgrow GDP.
“The market assessment among Africa’s reinsurance executives have deteriorated after it had already been on a road to recovery,” say, Andreas Bollmann and Henner Alms, authors of the study at Schanz, Alms & Company.
“While rates, terms and conditions and profitability are low, Africa’s economic growth has improved somewhat and may translate into volume growth. But executives fear the next crisis may be lurking around the corner as rising trade barriers and a slowdown in appetite for Africa’s commodities cloud the outlook.
“2018 has been a year of recovery. Africa’s GDP increased by an estimated 3.5 percent, roughly in line with the prior year, but trailing slightly below the global average of 3.6 percent and the emerging market average of 4.8 percent. Insurance premiums expanded by 4.9 per cent, ahead of GDP”.
According to our assessment, reinsurance will have benefitted in line with insurance market growth, surpassing for the first time the $ 7.5 billion mark.
“Reinsurance exposure is expected to outgrow GDP growth. Values are up due to unfavourable exchange rates developments for imports as well as claims inflation in health insurance. Executives also assume that premiums will grow in line or ahead of GDP, which across Africa will rise by 3.5 per cent.
However, market participants also voiced their concern that insurance is still not innovative enough to capitalise on the opportunities posed by technology and in the modernisation of Africa’s societies and economies,”’ the report stated.