Insurance and reinsurance companies in the Inter-African Conference on Insurance Markets zone have continued to grow profitably despite the various crises, according to the analysis agency A.M. Best. In its Best's Special Report, it also expressed concern about the country risk ratio, which could be a negative factor .
Last year's performance of the insurance business in the Inter-African Conference on Insurance Markets (CIMA) zone was good. According to the analysis agency A.M. Best, the reforms undertaken have paved the way for the rationalization of the market and have thus enabled the sector to grow considerably. In a report, Best's Special Report, published on Monday, March 12, the agency said that insurance and reinsurance companies in the zone have continued the profitable growth begun a few years ago, this "despite strong economic and sometimes political headwinds that have made operating conditions difficult." "Legislative reforms in the region designed to increase premium retention in the CIMA zone and strengthen insurers' share capital could help create a more robust market." supports the document.
Indeed, according to the Best's Special Report, taking into account the difficult economic situation and the continued pressure of tariffs in the oil and gas sector, the African continent presents "vast disparities in growth between the various countries". "In particular, the CIMA zone offers a contrasting picture to the rest of the subcontinent, with differences also evident among its members, says the report, which also speaks of a low penetration rate. The analysis indicates that in 2016, the CIMA zone had 182 insurers with a market of 1,103.1 billion CFA francs in gross written premiums, or 3% of the volume generated by the continent. "This resulted in a very low insurance penetration rate of 1.1%, compared to a global average of 6.3% in 2016," the report notes., note le rapport.
Charlotte Vigier, senior financial analyst at A.M. Best, agreed, drawing attention to the operational performance, which remained good with low claims levels. "The growth experienced by the CIMA insurance market has not been at the expense of profitability, with operating profitability supported by strong underwriting results and good, stable returns on investment.she said. The report also indicates that demand for insurance products has been growing steadily in the zone in recent years, with premium volumes more than doubling between 2006 and 2016. Unfortunately, according to A.M. Best, this performance hides a number of shortcomings in the environment.
Premium volume increases in 2018
Despite the shortcomings, the A.M. Best agency also announced a good forecast for this year. In particular, the agency predicted an increase in premium volume, driven by the recovery of the non-life segment as macroeconomic conditions in most member states improve. According to the report, as people become more aware of the importance of insurance, insurers will see strong demand in the life segment. At the same time, A.M. Best assures that the operating profitability of direct insurers, driven by stable rates and claims environment, should remain at a good level. The agency also reports that during the course of this year, insurers in the CIMA zone will take advantage of the requirement to increase the minimum share capital to 5 billion CFA francs for joint stock insurance companies by 2021, in order to have a strong balance sheet.
However, there are negative factors to watch out for. Ghislain Le Cam, Director, Analytical Division at A.M. Best, talks about country risk."Local insurers and reinsurers are exposed to a challenging environment prone to instability. In particular, political risks and social unrest have the potential to quickly and negatively affect a company's financial strength."explained the expert. According to him, insurers should improve enterprise risk management (ERM) and governance, two points on which insurers in the CIMA zone are often behind. "The regulatory changes introduced should encourage insurers and reinsurers to strengthen their technical capabilities, which should translate into improved risk management and governance practices in the long run. This could be a positive credit feature." added Ghislain Le Cam.
CIMA covers 14 countries including Benin, Burkina Faso, Cameroon, Chad, Congo, Côte d'Ivoire, Gabon, Guinea Bissau, Equatorial Guinea, Mali, Niger, Central African Republic, Senegal and Togo. It was established in 1992 and supervises the insurance and reinsurance activities in its member countries.
Source: : La Tribune Africaine
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