Premium outflows are rattling Africa’s insurance industry. Around 70-90% of premiums for speciality risks are flowing to non-African reinsurers, Afreximbank said in July. Without well-capitalised, technically skilled local insurers and reinsurers, sectors needing large, specialised cover in oil and gas, aviation and mining default to international coverage – placed offshore directly or fronted locally but ceded to foreign reinsurers. This pushes data, expertise, and profits that could be reinvested in Africa overseas. Stronger reinsurance capacity, risk pooling such as the Africa Re-managed African Oil & Energy Pool, and higher capital minimumshave been proposed as ways to improve retention. How should this be coordinated to make African insurers better positioned to cover large-scale and specialty risks?
Key points:
- What will help African specialty risk pools grow large enough to retain more oil and gas and mining premiums at home?
- Compulsory cession to African reinsurers: A smart way to retain premiums or a risk of excessive concentration?
- How can insurers and reinsurers deepen capital bases – and should regulators go further to compel them?