Africa is attracting much activity from insurers and reinsurers, but the industry faces challenges in ensuring its prosperity over the long-term, according to the chief executive officer (CEO) of Munich Reinsurance Company of Africa.
“Africa has been in the news a lot recently and is now seen as the last investment frontier market,” said Junior John Ngulube. “This is good as it has attracted a lot of foreign direct investment including international insurance and reinsurance players.
“In the short term, one expects a lot of activity as insurers and reinsurers try and carve out space for themselves. In the medium term, reality will set in and some of the new players will experience fatigue and retreat. The winners will be players who take a very long-term view and have the staying power.”
International insurance groups are eager to establish a footprint on the continent, which is expected to be home to seven of the world’s fastest-growing economies by 2015. Africa’s insurance industry is currently in focus at the 19th African Reinsurance Forum, held from 6-8 October in Tunis, Tunisia. The forum’s theme is
‘The Insurance and Reinsurance Market in Africa: Changes and Growth Potential’
, according to the African Insurance Organisation, a non-governmental body and host of the forum.
South Africa’s economy continues to be by far the largest on the continent and this is reflected in its insurance industry, which is also the biggest in the region, Ngulube said. South Africa had total premiums of US$52.4bn in 2011, helped by one of the highest insurance penetrations of life insurance in the world.
“The reason for this is that there is hardly any state provision for retirement, all being in the private sector, including that for government employees,” said Ngulube. “South Africa is one of very few countries in the world with a fully funded government employee retirement fund.”
He added that there was significant growth opportunity in other countries, especially those rich in resources. Many are recording annual growth in their gross domestic product (GDP) of more than 5%.
“Notwithstanding the fact that their insurance industries will be coming off a small base, countries like Nigeria, Kenya, Angola, Ethiopia and Ghana are showing great promise. Some north African countries also have substantial insurance markets with good growth prospects, notwithstanding the recent political events there.”
The main challenge for foreign investor is to understand that Africa is not one country but 55 different countries; each one with its own separate and distinct characteristics.
“In addition, it is a huge continent; a fact missed by many. The challenge for the investor is picking the right markets to focus on and then try and understand each one before jumping in,” said Ngulube.
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