African Insurance Industry Positive Prospects Draw Foreign Investments in 2016

Africa is a huge continent comprising of 54 financially active zones, and given its growing economic dynamics, the scope of insurance industry is leaping ahead ten-folds. As per the UN, the GDP of this region jump across at 4.6% in 2015, from 3.5% of 2014 to 4.9% in 2016. The possibility of success is because of private consumptions and investments with key drivers as expanding disposable income by middle class, consumer confidence on financial environment of the region etc.

Dynamic Demographics

Lower costs of performing business activities are also pursing economic brilliance. The World Bank had projected the GDP advancement at 5.2% annually for 2015-2016. Some of the challenges are lessening commodity prices. But it is overcome by significant public expenditure on agricultural production, telecoms, infrastructure, finance, transportation and a lot more. As per insurance market research reports, Africa is supposedly the second fastest leading economic regions worldwide after Asia. 

As insurance companies had a low rate of penetration in this continent, now it is a feasible industry altogether, comparable to mature markets of Europe and the U.S. Against Eurozone’s 7.6% hold in finance sector, Ghana and Morocco rank at 3%, Angola has 0.65 to 0.9% in Nigeria. Though there is low level of awareness among Africans about insurance facilities, the knowledge of it is slowly disseminating further. The penetration ratio in finance industry for Namibia is 7.7%, 15.4% for South Africa, and 5.8% for Mauritius.

International Investments in Africa

Two global insurers have plans to startup their economies in South Africa. As if the positives were not enough, in April, Euler Hermes (credit insurance company) is launching services in regional market to strengthen its existence in the continent.

Such propositions are attracting greater investors’ interest in developing markets of Africa. The foreign escapade in the region saw a high when Swiss Re Corporate Solutions made a similar move in February. Operations are gung ho about engineering, mining, real-estate, commercial insurance industry, and others.

Market Segregation

The African insurance sector has discrepancies in collaboration with its operators for finance. For e.g. as stated by insurance market research reports, Kenya and Nigeria each has 50 insurance organizations, but Liberia with 3.5 million populations has only 20 insurance companies. If these companies coordinate well, then growth would be expected faster.

The swings in prices at regular intervals and impeding competition may again pose few risks, but can be handled if smart tactics are involved in winning people’s trust with improved services. The African continent is rich in culture, politics, and social structure, and not becoming stronger in economic base as well. With a region boasting of large population more diverse markets can be seen eventually, which is good for global and regional finance scenario.

Though the challenges are tough, Africa seems to be in breakneck competition already, transferring credible resources to keep the GDP accelerating. The conception about the region being ridden by wars, drought, and poverty, all such beliefs may change soon with expectations of a starlit future. Positive forecasts are on the way for insurance industry, and it has no reason to look back, but only move ahead.