For many years, the reinsurance markets of sub-Saharan Africa (SSA), though small by global standards, have provided global reinsurers with an opportunity for diversification and profitable revenue growth. However, competition and rising acquisition costs have led to a gradual deterioration in the performance of market participants, reducing the attractiveness of the region to potential new entrants.
In a new Best’s Market Segment Report, “Tough Operating Conditions Present Challenges for Sub-Saharan Reinsurance Markets”, AM Best notes that the operating environments across SSA remain difficult for both domestic and international companies, more recently exacerbated by the COVID-19 pandemic (albeit with varying severity).
Many of the region’s markets face double-digit inflation and local currency depreciation; and for some countries, government instability and corruption have contributed to social unrest and political uncertainty.
Despite these challenges, there remains significant growth potential for the (re)insurance sectors due to the region’s substantial natural resources, a young and growing population, and the gradual development of regulatory regimes.