African insurance brokers are supporting the industry across the continent by driving innovation, according to Ryan Phillips, managing director at Afro-Asian Insurance Services, and are also contributing towards the sustainability of the sector.
As the latest signatory to the Nairobi Declaration on Sustainable Insurance, Mr Phillips said brokers have a key role not just in helping to design products to cope with climate change but also on the governance, support clients as they strive to maintain compliance with changing rules and regulations.
“I do feel that ESG is important – we all want a world for our children and grandchildren – but fairness is important too. Being an African broker there is a bit of conflict between the E (environment) and the S (social) when it comes to natural resources, which they are just exploring and finding at the moment.
“From a European perspective, particularly from the investment side, investors don’t want to go down that route – they won’t invest in Africa because of ESG. But we all know about the load shedding and the power cuts and Africa doesn’t have the same access to power and energy as we do. Sometimes there is a push from Europeans for Africa to skip their natural resources and jump straight to renewables.”
He added: “Africa’s emissions are probably about 1% so is it fair for the West to ask Africa to skip those natural resources because the West has exhausted its supplies and is looking at renewables? There has to be balance. Insurance helps with hybrid solutions and enables new solutions. But I don’t think Africa shouldn’t be forced down the renewables route at a faster speed,” he concluded.
Turning to the Ukraine war and its impact in Africa, Mr Phillips said: “There is a major disconnect on pricing in the war and terrorism market, which has been very competitive and in which a lot of African players buy from the London market. For the first year in probably 20 years that market has made a loss because of the civil unrest in South Africa and because of the war in Ukraine. And now they are trying to recoup by putting prices up.
“But trying to explain to someone who has gone five years loss free that their prices need to go up by 30% because of a war in Ukraine is a very difficult challenge and there is no good argument for me to give them,” he said.
Brining the conversation back to sustainability, he said: “I have seen the African insurance market try to become self-sustaining and reducing its reliance on international markets. I think Lloyd’s and other international markets could be in danger of pricing themselves out of the market. They could lose out and they may not get back in so there is a real challenge for international markets because they have to be more supportive of Africa and not put price hikes onto Africa first when the losses aren’t coming from Africa.”
He added: “Whenever there is a hurricane or another major shock, the largest global reinsurers put the prices up first in the emerging markets and it is those emerging markets that suffer. I have never quite understood the logic of that. Africa is now so strong in the reinsurance markets that they will be able to say that they don’t need the international markets. That would be a great shame as a healthy balance works well.”