Insurance World

Africa: Insurance Markets Of Oil Exporters Expected To Be Hardest Hit By COVID-19

The COVID-19 pandemic is hitting the Middle East & Africa region, particularly oil exporters, notes Swiss Re Institute.

In its sigma report, “World insurance: riding out the 2020 pandemic storm”, released last week, Swiss Re Institute said, “In the short term, this will be reflected in a contraction of the life market in 2020. Sector profitability will be negatively impacted by lower interest rates.”

As for 2019, before the pandemic erupted, Swiss Re Institute estimates that premiums in several markets in Africa (eg, Morocco, Egypt, Ghana and Nigeria), grew at double-digit rates in 2019, in spite of economic struggles. In contrast in South Africa, by far the largest market in the region, life premium growth was less than 1% due to the weak economic environment, which is also affecting sector profitability: low interest rates are impacting as investment returns and lapse rates are increasing.

The report also says that the COVID-19 crisis could also raise risk awareness and highlight the value of life policies.

Non-life

Even though COVID-19 reached the region after a delay, Swiss Re Institute expects the non-life sector to suffer from this year’s pandemic-induced recession. Oil exporters with structural issues before the crisis and limited financial resources available (eg, Nigeria and Angola) will be hit hardest.

The commodity price collapse, capital outflows, domestic lockdowns and the standstill in travel and tourism will impact sales in related insurance lines such as marine and credit.

Motor business will also be affected as incomes come under pressure. However, profitability may be boosted by lower claims frequency on account of restricted mobility in this year’s lockdowns. At best, Swiss Re Institute sees flat profits through 2021.

In 2019, non-life premiums in Africa barely moved (+0.8%, based on the markets where data is already available), notes the report. The weak economic environment was a key factor, particularly in large markets like South Africa and Nigeria.

The table below shows the premium income of the largest insurance markets in Africa in 2019 and their world rankings:   

World RankingCountryPremium$ m2019/2018Change %Share of world total %
nominalInflationadjusted
20192018201920182019
1919South Africa** 47,09349,002-3.90.70.75
5050Morocco** 4,6404,3845.88.10.07
5858Kenya+ 2,2392,1325.00.50.04
6064Egypt1,8991,56521.35.80.03
6368Nigeria* 1,6361,38518.16.30.03
7477Namibia** 1,3051,02627.333.90.02
7574Algeria** 1,2481,1865.35.30.02
8482Tunisia** 830858-3.2NA0.01
  World6,292,6006,149,0202.32.9100.00

+ provisional * estimated

** estimated USD value assuming constant insurance penetration

Source: “World insurance: riding out the 2020 pandemic storm”, sigma report – Swiss Re Institute

Source: Middle East Insurance Review

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