Jonathan Höh from the global network of GrECo nova insurance specialists spoke with pan-African insurance broker OLEA about the conditions in and peculiarities of that fast growing – but largely unstable – region.
HÖH: Why do we often have the wrong idea when we think about the size of Africa?
OLEA: For a long time, Europe was deliberately enlarged on maps to symbolise its power over other continents and countries. This is why Africa appears much smaller than it is in reality. In fact, Africa has a total area of 30 million km². Compared to this, China and the United States each measure just 10 million km².
HÖH: Are you expecting major growth in Africa in the coming years?
OLEA: Africa is the fastest-growing region in the world, even faster than South East Asia. Six of the 12 fastest-growing countries in the world are in Africa. The emergence of a new middle class and considerable improvements in economic governance are two important factors for long-term growth. Logistics is becoming more and more important, as are telecommunications and energy.
HÖH: What are the main risks for European companies doing business in Africa?
OLEA: Aside from the complicated political environment in most African countries, political violence and terrorism must also be taken into consideration. The World Economic Forum identifies the failure of national governments, financial crises and illicit trade as the main risks in this region. Social instability and the provision of resources are also problematic. Energy price shocks and water crises are possible.
HÖH: What does the African insurance market look like?
OLEA: The insurance market is still very immature throughout Africa – with the exception of a few markets like South Africa. Market penetration is below 3%. Ten countries account for 90% of all premiums paid on the continent. However, many markets in Africa are currently making progress in the insurance market. This development is boosted by an active regulatory agenda and reform, as well as by active steps taken by insurers to improve the immature market practices. The commercial insurers benefit from the growth of the energy, electricity and mining sectors and other affiliated infrastructures. M&A activities are rising, as new investors are being attracted to the continent and interregional activity is increasing, especially from South Africa.
HÖH: What special aspects of international insurance programmes must be considered?
OLEA: We are overseeing an increasing number of pan-African insurance programmes at OLEA. As there are different regulations for insurance policies in Africa, compliance with the local standards of each individual market is really crucial. This is a particular challenge due to there being 40 different insurance regulations in Africa. However, it is possible for the share that has to be placed in Africa due to regulatory requirements to be reinsured by renowned international players. The African reinsurers are rated from A- (Africa Re) to B+ (Continental Re). The minimum capital requirements were recently increased from 1 to 5 billion XAF/XOF (approx. 7.6 million EUR) in order to ensure that the insurance companies active on these markets remain strong and solvent.
HÖH: What regulatory challenges are companies confronted with? What insurance policies are mandatory?
OLEA: Insurance policies are increasingly being regulated in Africa. The CIMA code governs insurance in 15 different (mostly francophone) countries. It stipulates that risks of a member country may only be insured with an admitted insurer. The local obligatory shares have also been increased from 25% to 50% in order to keep more premiums in the countries (certain risks such as vehicles or health are retained completely). It is also important to bear in mind that these are “cash before cover” countries. This means that there is no cover before the premium has been paid. In addition to motor vehicle liability insurance that is obligatory according to the CIMA code, the insurance of imported goods is also mandatory. Even if the insurance in Portuguese- and English-speaking countries is regulated differently, these countries are increasingly tending to adopt rules from the CIMA zone (e.g. cash before cover). It also necessary in certain countries like Ghana, Kenya or Tanzania for local companies to utilise the local capacities before taking out offshore insurance.
HÖH: There are more than 50 countries with different languages in Africa. OLEA has established a network of branches and partner companies to cover such a large area.
OLEA: OLEA currently has branches in 24 countries and partners in 12 additional countries. We offer the same service quality everywhere, no matter whether French, English or Portuguese is spoken in the country concerned. That’s why we have appointed a network country manager in each country, who is able to answer all queries in English and is employed to deal with international programmes. We have also appointed a German-speaker as GrECo nova country coordinator to look after and help GrECo’s German-speaking clients.
HÖH: What do you focus on when advising clients and what special skills have you developed?
OLEA: The OLEA management team is based in Paris and consists of approximately 10 people. We know Africa very well and regularly spend time at our subsidiaries in order to understand market developments and the needs of our clients. It is very important for us to have a subsidiary or partner in almost every African country, as the legal environment, the market and the requirements are very different from country to country.
We established OLEA Specialities a few months ago to help our clients with their specific risks, as it is sometimes difficult to find solutions. We also regularly use an IT tool that is unique on the African market and offers our clients and partners access to all data they need to track their portfolio.
Thank you for your time!
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