Munich Re of Africa sees life insurance potential in Sub-Saharan Africa

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Countries in Sub-Saharan Africa (SSA) are set to grow their life insurance and reinsurance industries on the back of strong economic growth. Filipe Nunes, Head of Life at Munich Re of Africa (MRoA), told attendees at the reinsurer’s 2019 Africa Life Conference, held recently, that high GDP growth rates coupled with life insurance product innovation created the perfect platform for insurance-backed economic development on the continent. “We have seen country markets that started off with simple products such as group life and credit life taking their first steps towards complex individual life retail products,” he said.

The prospect of market-beating returns from Africa has encouraged global reinsurers to reinvent their Africa strategies. “We took a detailed look at our business – at the opportunities on the continent – and how we could best contribute to Africa’s economic growth,” said Jose Nicolas, Head of Strategy: Life at Munich Re SSA. He identified demographics as a primary driver for insurance and reinsurance industries on the continent because there is greater potential to sell life insurance policies to larger populations.

International reinsurers hoping to expand their reach in the SSA region must navigate three established trends. The first is the increased implementation by African financial market regulators of domestication policies. Domestication is an in-country regulatory intervention that requires local firms to place their insurance business with local or regional reinsurers rather than through international reinsurers. “Our approach to these policies is to partner with local and regional reinsurers and assist them with the technical support necessary to deliver appropriate solutions to end-users,” said Nunes.

These regulatory developments have created new opportunities for reinsurers under the second trend, namely the move towards capital solutions and financial joint ventures. “The 2008 Global Financial Crisis (GFC) pushed country regulators to implement risk-based frameworks for their insurance markets leaving us no choice but to react to the change,” said Nicolas. MRoA is already expanding its financial and capital management solutions, presently offered mostly in the South Africa, to other countries in the SSA region.

Nunes introduced the third and final trend, technology, as an enabler for the support function that reinsurers would play in a future-fit Africa. The high level of smartphone penetration across the continent has encouraged technology-backed innovation in various industries, with financial institutions and telecommunications firms leading the charge. Banks and mobile phone companies have teamed up to offer a range of mobile money solutions while reinsurers are developing solutions to improve efficiencies at client level. “We are in the process of developing a cloud-based online ‘group life’ quotation tool that will better service our insurance and reinsurance broker clients,” said Nunes.

The reinsurer is turning to digital age solutions to stand out in the competitive insurance and reinsurance environments. “There are over 20 reinsurers operating in the life reinsurance market in Africa,” concluded Nicolas. “It is difficult for Munich Re to differentiate itself in the existing ‘simple product’ market, but equally tough for these reinsurers to compete with us”. Under this scenario the reinsurer’s success depends on it building value at partner firms as well as the African country markets it operates in, over the long term.

Nunes added that there was scope to expand the life insurance product offering in Africa to include cover for mortality, disability critical illness, income protection, hospital cash and even retrenchment products. “Over the next few years we will deploy risk-appropriate life insurance products that make sense in each country we conduct business in,” he concluded “Our goal is to grow the life insurance market in a way that contributes to economic development at a country level”.