Access to finance is critical to unlocking Africa’s growth potential, underscoring the need for a stronger financial system that is capable of pooling long term funds, stakeholders have said.
They believe that funding has become necessary to support expanding exports and promote sustainable development in the Continents.
Kwesi Amusa-Arthur, vice president of the Republic of Ghana, who made the remark at the Africa Re’ 37th general assembly in Accra, Ghana, said insurance is critical in mobilising long term funds needed to develop African.
Amusa-Arthur stated that making the financial systems work better and stronger can help deliver rapid overall growth, as well as direct and indirect benefits across the income distribution.
He noted that the insurance industry in Africa has been growing at a moderate pace relative to other sectors of the financial services industry.
“The sector in Africa is at different stages of development and relatively divers products with only 7 countries having a penetration rate exceeding 2 percent, noting that the industry is mostly dominated by the non-life insurance business, with life insurance at an early stage of development.”
He pointed out that the low insurance penetration and other related constraints in the insurance industry provide us with considerable opportunities for developing the insurance sector in the continent. “We need to develop both general and life insurance product that can promote our transformational agenda.”
In this regard, we may consider insurance products in the area of health insurance, micro-insurance, agriculture insurance and other products that can reduce poverty and promote small and medium enterprises (SMEs) development, Amusa-Arthur observed.
“Another area of great interest is catastrophe insurance i.e. insurance against floods, droughts, earthquakes and other types of adverse climatic conditions which are very common in most Africa countries.”
He stated further that for the insurance industry to continue playing its critical role in the continent’s socio-economic development, the industry must develop strategies within the framework of changing the face of insurance practice in Africa. “In doing so, we should also maintain the highest professional standards in the face of challenges in the insurance market.”
South Africa accounts for 93 percent of life business and over 50 percent in non-life business in sub-Saharan Africa.
According to SwissRe in 2011, Africa’s reinsurance market represented 0.8 percent of the world share in direct premiums compared to 2.8 percent for Latin America and 10.7 percent for emerging markets. This is worth a total USD 6.4 billion compared to USD 21.9 billion for Latin America and USD 83.7 billion for emerging markets.
The situation of Africa reinsurance and insurance industries are similar to global trends. There are high frequency of claim recurrence due to aging infrastructure, relying largely on imports and thus on foreign currency for replacement, lack the requisite skilled labour and face ineffective and ill-enforced legal frameworks.