Algeria and Kenya topped the list of the fastest growing African non-life insurance markets, with real premium compound annual growth rates of 8.9% and 8.2% reported for 2014.
Meanwhile oil exporters Angola and Nigeria – their exports hit by the energy price slump – saw premiums shrink by -2.6% and -2.2% respectively.
South Africa’s premium represented 71% of the whole continent’s $69bn total in 2014, and 40% of its non-life total – with much higher penetration rates, according to an “Africa Insurance Barometer 2016” report.
After South Africa, but still a long way behind, sit Morocco, Algeria, Nigeria, Kenya, Egypt and Angola as the largest non-life markets, each representing at least $1bn premium, said the report from Dr Schanz, Alms & Company.
The report listed high government deficits, the global crunch in commodity and energy prices, African currency depreciations, China’s economy, heightened African political risk and instability threats, and shortages of talent and disposable income as factors stunting Africa’s insurance market growth potential.
“Africa’s economic boom and subsequent growth of its insurance market, which is well above the global average, are the region’s most significant strengths, according to the majority of the executives polled,” said the report.
“The market’s robustness has improved markedly, partly due to tighter regulation, but also benefiting from enhanced distribution of insurance products driven by the growing success of bancassurance and mobile phone distribution.”
Excluding the South African market, African non-life premium was $13.8bn in 2014, “clearly dominating the African insurance sector”, said the study.
“With the exception of South Africa and Namibia - where insurance penetration levels reached 14% (life 11.3%, non-life 2.7%) and 7.3% (life 5.1%, non-life 2.2%) respectively - the contribution of insurance to GDP was significantly lower than the global average of 6.2% in all other African countries. In more than half of all African countries penetration was lower than 1%,” said the report.
Low disposable income remains the main obstacle to more rapid insurance market development, noted the report.
“The Ethiopian insurance market, like many other African emerging markets, urgently needs an aggressive capacity building initiative,” said Fikru Tsegaye, director, marketing and strategic management, Ethiopian Insurance.
“As of today, the market suffers from a significant lack of relevant insurance skills and talent. The government, regulatory authorities as well as insurance companies need to close the current gap through concerted action,” he added.
Weakening local currencies will continue to hit the reported figures of African insurers when converted into appreciating US dollar values, noted the report.
“In 2014, the 10 largest markets (South Africa, Morocco, Egypt, Nigeria, Kenya, Algeria, Angola, Namibia, Tunisia and Mauritius) generated a premium of $63.4bn, or 92% of total African premiums,” said the study.
“Among these top 10 markets, Kenya recorded the steepest nominal premium growth with 20% (12% inflation adjusted). The largest market, South Africa, grew at an inflation-adjusted rate of 1% over the same period,” added the report.
The table below is taken from the report, charting African premium in $m, reported between 2010 and 2014.