Africa insurance on the cusp, but access remains tricky
If you speak to someone in the international insurance sector and mention Africa, you will generally get a positive response.
Many believe the level of investment set to be delivered across the continent in the next decade will make Africa the next big growth area for risk. Indeed, one leading re-insurer told Fairplay that having “been too late” into Asia, they will not make the same mistake in Africa.
Sharing this enthusiasm is the International Union of Marine Insurance (IUMI), which is holding its annual conference in Cape Town, South Africa, from 15–20 September – the first time the event will be held in Africa in the organisation’s 144-year history.
“We are delighted that we are holding the conference in Cape Town, as one of our key aims is to build stronger links with African markets,” IUMI secretary-general Lars Lange said. “We believe there are huge opportunities for the wider marine insurance market in Africa and we hope that the conference will enable our members to discuss how they can engage with African clients and support African maritime markets.”
He added that the room for development in many African economies will go hand in hand with greater trade and, with it, greater use of maritime transport.
“As an industry, we have to be prepared to support that growth and the likelihood is that some areas of that growth, when it occurs, will be swift,” he explained.
IUMI has been working hard to boost its presence in Asia in recent years, having established a dedicated office in the region, as well as launching its first annual region-specific conference this year.
“We have a dedicated, full-time representative in Asia and also have established an office,” Lange said. “The aim is to look to employ a full-time representative in Africa to start [a similar] process.”
Currently, only Egypt, Morocco, Nigeria, and South Africa are members of IUMI, but Lange is eager to boost these numbers.
“While, at present, we only have four African member associations, we are keen to grow that figure and will be engaging with a number of African countries, such as Kenya, in the coming months to enhance that membership,” he said.
For marine insurers, the African market remains in the very early stages of development.
IUMI figures show that it currently covers about USD600 million, or about 2% of global marine premiums, from Africa, the majority of which comes from cargo risks.
The potential for growth across the continent is massive, especially as a significant volume of infrastructure investment is anticipated that will boost the movement of goods and equipment. Africa is increasingly viewed as a key trade region where hub port growth is likely to continue.
However, the ability for international marine insurers to access the continent has been, and continues to be, impeded by individual nations who restrict the level of overseas involvement in their insurance sectors.
The speciality nature of the business inevitably sees domestic insurers looking to reinsure the majority of their exposures to the international markets, but in some states, regulators and governments are looking to restrict such deals in an effort to keep more of the premiums within their borders.
A good understanding of the market is vital. “It is an extremely difficult region in which to operate unless you really know it,” one broker told Fairplay. “Underwriters do have concerns as premium payments can be erratic and, while the situation is improving, insurers have to be mindful of the potential for corruption in some areas.
“It is also a question of the quality of the risks. Risks can be underwritten but the question all too often is whether the client is willing to pay the price for the cover,” the broker added.
Neil Roberts, head of marine underwriting for the Lloyd’s Market Association, said, “South Africa is the dominant market when it comes to non-life insurance and [it] will be looking for long-established firms in the international market for their insurance.
“In terms of the marine market in London, we have a number of fishing fleets that are covered and De Beers has a fleet of dredging vessels that mine the seabed for diamonds that are also covered in London. Cargo is the major cover and we have a good deal of business from Africa across a number of countries, such as oil exports from Nigeria.
“There is a demand for natural catastrophe and political risk covers. There are opportunities and we are always open to risks that meet the underwriting criteria set by the various companies and syndicates,” Roberts added.
IUMI’s annual conference will tackle issues facing the global shipping industry, such as the rising threat of cyber attacks, but Africa will be centre stage for large parts of the event.
Nineteen presentations across the conference will focus on Africa and its maritime and energy industries. From offshore diamond mining to ship arrests and compulsory insurance laws across the continent, the aim is to deliver a greater understanding of what the region can offer to an underwriting class that prides itself on being a global business. African ports and their operation and risks are also a focus, with several presentations looking at the development of Africa’s port and logistics infrastructure.
While the growth potential is increasingly evident, Africa also comes with maritime risks.
Insurer Allianz Global Corporate & Specialty (AGCS) said the west African coast maritime region was the eighth-highest location for shipping losses globally in 2017, with three ships lost – the same level of activity as 12 months earlier.
The area is also sixth as a global loss location over the past decade, with 51 ships lost. The west African coast is also the 10th-highest location for shipping incidents, with 707 reported incidents in 10 years.
Meanwhile, the east African coast maritime region saw two ships lost in 2017 – making it the joint 10th hotspot overall. It is also the eighth-highest loss location over the past decade, with 34 ships, while the Red Sea region has seen 12 ships lost over the past decade.
Marine insurers have thought for years that African waters were dominated by the threat of piracy. However, this trend is now reversing.
Data from AGCS show that piracy activity levels are down year on year across Africa, with 57 incidents reported in 2017, compared with 62 in the previous 12 months. Africa still accounts for 32% of the 180 piracy incidents reported globally in 2017, second only to Southeast Asia.
The Gulf of Guinea remains the region’s piracy hotspot with 36 reported incidents in 2017, accounting for 63% of African highjackings. The number of attacks off the coast of Somalia – which has seen dramatic safety improvements in recent years – has increased year on year from just two incidents in 2016 to nine last year.
“The threat of piracy remains, albeit less pronounced than in recent years. Hijackings and the boarding of vessels continue, tied to the inequality and economic situation in parts of Africa and Asia. It behoves us all to understand that global economic and geopolitical conditions play on the security of shipping,” said Andrew Kinsey, senior marine risk consultant at AGCS.
Contact Jon Guy