Currently, the world’s insurance industry is dominated by developed countries. The Group of Seven (G7) countries alone account for almost 65% of the world’s insurance premiums even though they cover just over 10% of the world’s population. However, the total premiums in Africa for both life and non-life insurance amounted to US$71.9 billion in 2012, which translates into a penetration rate of 3.65% well below the global average, which is 6.5%, though it is above the average for emerging markets of 2.65%1.
Despite lower commodity prices and the slowdown of the Chinese economy, as well as strains in some large emerging economies, the economy in Sub-Saharan Africa is expected to grow by 4% in 2016. Even though higher borrowing costs are weighing heavily on some of the region’s largest economies such as Angola, Nigeria, and South Africa, the zone presents significant potential for infrastructure and economic development through foreign direct investment and public-private partnerships.
“2015 was a very tough year for emerging markets and some countries will remain highly vulnerable to economic shocks and market volatility in 2016,” said Ludovic Subran, chief economist at Euler Hermes. “Sub-Saharan African countries will continue to face a trio of challenges: low commodity prices, the Chinese slowdown and the tightening of US monetary policy. These countries also suffer from their own internal pressures such as inflation, weak domestic demand and socio-political tensions.”
In spite of the challenges, the region remains the fastest growing insurance market after emerging Asia, with insurance premium growth of 4.5% to 5% predicted for 2016-172. However, Maïdou warned that insurance needs to keep pace with investment and economic development: “Sub-Saharan Africa’s continued growth depends on closing its vast infrastructure and skills gap, which needs innovative credit and investment solutions facilitated by public private partnerships through a clear policy and legal framework. But for these solutions to work, they will require equally appropriate risk management and risk transfer solutions – which essentially means increasing insurance penetration.”