With three out of four of the global rating agencies giving the region a stable outlook as reinsurance markets head to 1/1 renewals, that measured stance is likely to be adopted by African major reinsurers.
Africa Re CEO and group managing director Corneille Karekezi told delegates attending the African Insurance Organisation’s Reinsurance Forum in Mauritius that he will be leading the way in that stance to protect underwriting margins rather than simply chasing premium growth.
That message of maintaining underwriting discipline was being heard loud and clear throughout the conference, echoing the message from Moody’s that companies needed to focus on differentiation and portfolio quality.
The only note of caution came from Fitch Ratings which has warned of a deteriorating environment and that the market needs to prepare for lower returns while maintaining capital discipline.
While the market may soften in some areas, not everyone is as convinced, with some pointing to the situation in the Middle East and how that might drive premiums back up globally. Others pointed to the US where the picture is very mixed, with rates in some areas already hardening and others softening.
Looking ahead, Karekezi said it is hard to know whether the current market softening will flatten out or whether it will continue further.
He took delegates through some of the many challenges affecting the African market, including geopolitical headwinds. “Africa is not directly involved in these conflicts but everything that happens globally has a negative impact on Africa,” he cautioned.
The Africa Re CEO pointed to the statistic that 40% of African fertiliser comes from Qatar, which has been heavily impacted by disruption in the Middle East.
There are also ongoing concerns about depreciation of currencies, said Karekezi, particularly for reinsurers who report in US dollars. He pointed to Egypt, Ethiopia and Nigeria as counties which have been hit hardest by recent currency movements. In contrast, Algeria and Uganda have enjoyed relative stability.
However, he stressed “We do business in every country despite the volatility of the currency and Africa Re will not raise rates in one country because another country is struggling.”
Other challenges include the protection gap. Looking at the impending El Niño, Karekezi gave the example of how different jurisdictions deal with impending catastrophe.
“If you live in Miami,” he said, “you can buy insurance against the risk right up to the moment the hurricane hits land – it could be just 15 minutes away and yet you can still buy insurance. Here in Africa, we know El Niño is coming but what are we doing about it as insurers?”
That is a missed opportunity, he said, but admitted that offering cover is hard to do because insurers still don’t have a full picture of what catastrophe losses really cost the sector.
On the subject of data, he also pointed to the cyber risk facing clients and the sector itself, with millions of daily attacks against businesses and business leaders.
But despite the challenges ahead, Karekezi’s overall message was optimistic. African reinsurers, he said, are delivering an average 14% return on equity, slightly ahead of the global picture, making Africa a solid place for investment.
However, he urged the market to invest locally and reduce reliance of overseas investment. His message was that Africa needs to do more for itself, whether that is creating its own fertiliser industry, investing in cross-border trade or keeping reinsurance dollars in the continent.
COMMENTS