Figure 1 Premium volume, penetration rate and growth outlook

The African Insurance Market At A Glance


Extract from KPMG’s Insurance M&A report for Africa, including country by country analysis

Key trends impacting the insurance sector in Africa


■ We expect to see an increasing level of M&A activity as new investors are attracted to the continent and there is an uptick of inter regional activity, particularly from South Africa

Macro economic and demographic trends continue to support the underlying investment thesis, combined with low insurance penetration levels and a developing sector

High growth potential exists in a number of markets but we expect sub-Saharan Africa to be particularly attractive over the next 5-10 years, with an active M&A environment as insurers look to capitalize on the opportunities.

Development of the industry

Many markets in Africa are experiencing a step forward in terms of the sophistication of the insurance market. However, in comparison to other global high growth markets, there are still significant areas requiring development

We believe positive influencers for the industry are:

an active regulatory agenda and reform (leveraging the IAIS Insurance Core Principles)

increasing collaboration between regulators to show best practice and agree common framework for future reform (e.g. CIMA and EAC)

development of bancassurance model in some countries which will encourage growth of the life insurance market innovation, in terms of new products and developing direct capability, leveraging mobile technology (opportunity to leapfrog more mature markets)

strong approach taken in many markets to improve poor market practice (e.g. payment of premiums by agents) which will help reduce fraud and improve compliance standards

commercial insurers will benefit from the continued development of the oil sector and growth of related and other infrastructure

continued focus on micro insurance which will help improve education and awareness (currently a major barrier, with insurance lagging behind the banking sector).

Challenges in undertaking transactions

We highlight that the challenges in undertaking transactions should not be underestimated and potential investors should expect to face lengthy and delayed processes with potentially unexpected developments

Investing in the relationship and building a consensus view of the transaction structure and perimeter, valuation expectations and need for detailed due diligence is recommended.

Key trends impacting business models in Africa

Products and markets

Non life products tend to dominate given the savings market is still in its infancy in many countries

Overall penetration remain very low, highlighting the opportunity

Livestockandagribusinessgainingtractionin rural areas

Significant opportunities remain in commercial lines (oil, real estate, infrastructure, shipping, etc) driven by GDP growth and regional/ global expansion of corporates

Distribution and operations

Distribution varies across countries:

brokers and agents are typically an important channel;

bancassurance is at an early stage of development (and will be key in increasing penetration in both the non life and life markets); and

direct is important and growing (particularly leveraging mobile technology and associating insurance with local “trusted” brands)

Governance and people

High incidences of fraud provide opportunities to improve claims management.

WeakITenvironmentandpoordata quality

Shortage of talent with deep insurance experience.

Governance and transparency is being improved in some markets, particularly around agency management

JVs are difficult to operationalise – few players operate truly jointly.

Regulation and capital management

Evolving regulatory environment with modernization of regulatory framework, such as ICPs, RBC, IFRS.

Customer protection is of increasing importance.

Immature local capital markets provide limited “local” investment opportunities for insurers.

Snapshot of Africa premium volume, penetration rate and growth outlook

Figure 1 Premium volume, penetration rate and growth outlook

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