Insurers mull capacity to explore growth opportunities in AfCFTA
Building insurance industry capacity is critical in identifying growth opportunities in the African Continental Free Trade Area (AfCFTA) and making the sector play active role in liberating the continent and helping its governments enhance welfare of citizens.
Stakeholders at the recently concluded African Insurance Organisation Conference and General Assembly hosted by Nigeria, agreed on the need to build synergy within the continent, to enable domestication of larger proportion of the risks that will merger from implementation of AFCTA.
By estimates, if we get it right, we can bring several millions out of extreme poverty and raise the incomes of 68 million others who live on less than $5.50 per day.
Sunday Thomas, commissioner for insurance/CEO of the National Insurance Commission (NAICOM) in his remarks at the investiture of Tope Smart as the new president of AIO said, the African insurance market is in dare need of serious collaboration and synergy now than in any other time in the past as we rightly agreed here that we must look inward if truly we want to make an impact.
“Time has passed that we rely on foreign or international support from the west and other super powers as the world at large is overwhelmed by so many issues. Developing the insurance markets across Africa is no longer a choice but a necessity.
According to him, it is not only in Nigeria that there is huge growth potential in insurance, but all over Africa, if only we can unite and develop insurance business there is a lot our governments will get economically.
Thomas said the signing of the Africa Continental Free Trade Agreement (AfCFTA) has provided an avenue to foster unity and integration within the Africa region. It provides an avenue for the achievement of a common market for goods and services; guaranteeing free movement of human resources, investment and technology.
He, therefore, charged the new leadership of the AIO led by Tope Smart, the MD/CEO OF NEM Insurance to vigorously persuade the governments across the continent to play their roles in providing the necessary support, creating an enabling environment for insurance activities to flourish, continued lifting of border barriers making the movement of resources almost impossible, promote healthy competitions amongst member states and promoting knowledge sharing across the continent among other objectives that will make insurance business thrive within the African markets.
Vice president, Yemi Osinbajo who also spoke at the closing ceremony of the 2021 AIO investiture urged African insurers to leverage opportunities in the AfCFTA, adding that, “every smart economic grouping, whether governments or businesses, must be thinking, planning and strategizing for these new times.”
“The free trade agreement presents a major opportunity for African countries. By some estimates, if we get it right, we can bring several million out of extreme poverty and raise the incomes of 68 million others who live on less than $5.50 per day. There are potential income gains of up to $450 billion, and just cutting red tape and simplifying customs procedures alone could drive up to $250 billion of that sum,” he pointed out.
He said, “so, what does all this mean for the insurance industry in Africa? Well, plenty of opportunities. More trade in goods will mean a greater need for insurance services, brokers, in particular, should expect a boom; demand for trade facilitation services will rise, but obviously companies that already have market presence in other African countries, even if by collaboration, will benefit more than others.”
While expecting to see better-capitalised insurance providers from other African countries coming to compete in the Nigerian market, he added that, “services can be set up faster than manufacturing plants. Nigerian financial services companies, especially banks, are already in many African Countries, the likes of Zenith, Access, UBA. How about Insurance companies? We should now be looking at developing home-grown international African insurance conglomerates. The time is now.”
Osinbajo said there will obviously be opportunities for new insurance products and solutions, especially, in the property and casualty segment of the business, he said, insurance companies must also be prepared for the systemic nature of climate induced damage, with the possibilities of market failures and more system-wide destabilisation.
“Here in Nigeria, the growing intensity of flooding and damage to vast agricultural acreages might have a knock-on effect on other areas of the economy. Further slumps in the economy are bad for everyone, even insurers,” he noted.
Tope Smart, the new president of AIO in his five-point agenda that will serve as a guide during his one-year tenure, he said his administration will be anchored on five key areas namely: increased awareness; adoption of digitalisation; collaboration with other markets; collaboration with government and regulators and building customers’ trust.
He stated that the insurance industry in Africa has underperformed compared to other sectors such as banking, telecommunication, and promised to reverse the trend, underscoring the low performance of the African insurance market.
According to him, Aside from South Africa, Morocco, Kenya, Egypt, Malawi, Zambia and Ghana no other African country has been able to grow penetration to one per cent, promising that, things will change positively during his tenure.