The current instability in the global economy and the political risks that are still obvious as barriers in the African markets, however, the insurance industry is now discovering that the region also holds a number of potential growth opportunities that have been primarily untapped.
This, according to a recent report that has been issued by A.M. Best, the rating agency.
The A.M. Best insurance industry report indicated that “Given anticipated development of gross domestic product (GDP) in the region,” there is considerable opportunity presented. The report was entitled: Africa’s Diverse Insurance Markets Offer Growth Opportunities, Untapped Demand.
The largest insurance industry market in West Africa is in Nigeria through the oil and gas industry.
A.M. Best pointed out that this has generated considerable development in Nigeria. However, the South African insurance industry market has also created an economic foundation as well as a mature sector in life coverage, according to the report. This has allowed many domestic insurers within that country to be able to look outside of South Africa into other parts of the world, including within the same continent.
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The senior director of analytics at A.M.Best, Carlos Wong-Fupuy, said that “Countries with stronger economies—often driven by the energy sector and mining—have enjoyed greater demand for insurance, while affordability remains an issue in poorer African countries.” He went on to explain that there are a number of different elements and factors that these countries have in common which have helped to boost the appeal of certain regional and continent-wide relationships and initiatives within some participants in the insurance industry.
There is considerable diversity among the 54 countries that make up Africa, and the report pointed out that where there is a greater issue with affordability – which is not as much of a concern in economies that are more developed – there is a growth in microinsurance.
The author of the report, Yvette Essen, who is also the director of industry research, Europe & Emerging Markets, pointed out that the penetration of the insurance industry into Africa is growing, but that it is starting off from a base that is quite low. She also indicated that insurers are using microinsurance to attempt to increase the appeal of this type of product.