Experts have charged insurance companies across Africa to increase their level of risk retention locally to grow and develop African insurance market profitably.
The experts, who spoke at the just concluded 48th African Insurance Organisation (AIO) conference in Nairobi, Kenya, stated that insurers on the continent must increase their capacity and appetite to wrestle substantial part of the risks ceded abroad annually.
They also believe there are opportunities for insurance growth on the continent as investment shifts more toward African countries, from which insurance sectors across countries will benefit.
The Kenyan President, Uhuru Kenyatta, at the 50th anniversary of AIO, encouraged insurers and reinsurers’ operation out of Africa to increase their retention capacity through increased investments.
“With increased investments, the continent, I am sure, will also encourage and ensure that we meet our ESG goal as envisioned in the theme of conference: ‘Insurance and Climate Change: Harnessing the Opportunities for Growth in Africa’, he stressed.
Speaking on the theme of the conference, Kenyatta, who was represented at the event by the chief administrative secretary, the National Treasury and Planning, Kenya, Eric Simiyu Wafukho, said the insurance industry has a critical role to play in helping companies and nations manage, measure and reduce the impact of climate change.
To him, “We …. cannot continue with business as usual in the face of increasing frequency and scale of risks caused by climate change, we must adjust our business models to better support Environmental, Social and Governance (ESG) issues.”
Stressing that Africa is one of the world’s most attractive regions for investment in the insurance sector, he added that steady economic growth in most countries combined with a largely underdeveloped insurance sector have positioned the continent to the second fastest growing region for insurance globally after Latin America.
“Prior to the impact of COVID-19, the insurance market was expected to grow compound annual growth rates (CAGR) of 7 percent per annum between 2020 and 2025, nearly as fast as North America, over three times than that of Europe, and better than Asia’s 6 percent,” he pointed out.
The president of AIO, Mr. Tope Smart, believes growth opportunities in the African continent remain high, largely driven by a young and growing population with increasing utilisation of technology.
Despite the additional pressures of unrelenting regulatory and insurance accounting changes, and the huge costs associated with the changes, he noted that there are also some positive developments and opportunities for growth.
According to him: “The younger generation is looking for new ways to connect and protect, bringing affordability and access to the continent. These market conditions and dynamics are likely to continue to give rise to Insurtechs, who through technological innovation, are able to tackle consumer awareness and resistance, and address inefficiencies within the financial system for product development, distribution, and settlement”.
Smart, who is also the group managing director/CEO, NEM Insurance Plc., stated that there is a vital responsibility on the shoulders of the AIO to lead the action toward a synergised African insurance industry working toward standardisation and harmonisation within the African insurance industry.
“We have the lessons of the past to guide us, and there is no better time to start than now. The COVID-19 pandemic caught many of us unprepared with regards to digitalisation and innovation; we therefore need to be more proactive and move away from our old ways which are no longer relevant, and move toward insurance which people can trust, insurance that is tailored toward the needs of customers, insurance that is affordable, insurance that is accessible and relevant to the problems of today,” he stressed.