With a population that has a higher number of children and elderly, Zambia is left with not enough workers. Its dependency ratio leaves it vulnerable to taking on too much future debt, regardless of any post-default restructuring solution.
Allianz and Sunu in francophone Africa insurance reshuffle
Pathé Dione’s Sunu Group is about to get bigger as Allianz divests businesses in francophone Africa to the pan-African insurer.
The move is prompted by higher regulatory capital requirements from 31 May in countries governed by the Conférence Interafricaine des Marchés d’Assurances (CIMA).
The German insurance giant will divest businesses in Benin, Burkina Faso, Mali, Togo and the Central African Republic – all CIMA countries. Allianz will continue to operate in some CIMA countries through partnerships with local market players.
- Sunu Group’s acquisitions follow a pattern of rapid growth since it began in 1998 by buying up AXA subsidiaries in francophone Africa.
- The group, founded by Senegalese entrepreneur Dione, has a presence in 11 of the 13 CIMA countries, plus Ghana, Liberia and Nigeria.
Adapting to a constant pattern of regulatory change is the main challenge in African insurance, says Delphine Traoré Maïdou, who will head Allianz’s new strategic hub in Abidjan, Cote d’Ivoire.
CIMA says its new capital requirements are aimed at encouraging consolidation in a fragmented market. It is imposing a minimum of 3bn CFA francs ($5.2m) in 2019, which will rise to 5bn CFA francs in 2021.
Africa’s insurance markets suffer from excess capacity and cut-throat competition, argues the African Insurance Organisation in its Africa Insurance Barometer 2018. Yet, paradoxically, the continent’s low insurance penetration still presents one of the market’s largest opportunities.
- According to the barometer, protectionism such as that evident in the CIMA area might prove a double-edged sword, weakening the market’s ability to diversify risks and retain access to international expertise. Africa’s insurers often highlight the lack of local talent, in particular for stafﬁng key actuarial functions, the report said.
Regulatory uncertainty makes the opportunities harder to grasp. “Unrelenting regulatory change” is applying significant pressure, increasing costs and disrupting the insurance industry in Africa, according to a 2018 report from PwC.
- But the constant changes also present “hidden opportunities” for insurers to reassess risks, reallocate capital and review their business models and products, PwC says.
Allianz lagged rivals such as France’s Axa in turning to Africa. Only in Cameroon, Senegal and Cote d’Ivoire does Allianz hold market leadership positions. Refocusing on Cote d’Ivoire as a hub makes sense in that context.
- Cote d’Ivoire is one of the fastest growing economies in Africa, Traoré Maïdou says
- As the Africa Insurance Barometer notes, a lack of skills and market expertise is a key constraint on insurers
- Abidjan is easy to access from most African countries and Europe, and is a good place for Allianz to attract the right talent, Traoré Maïdou argues.
Respondents to the Africa Insurance Barometer paint a more cautious picture.
- Technical skills are less accessible in West Africa than in the North or South of the continent.
- With the exception of Senegal, economic growth is fragile, the report says.
- For Africa as a whole, only a third of the interviewees expected premiums to outgrow GDP, while another third predicted that the two will move in tandem.
- In many areas, the hard work of explaining products to populations that are unfamiliar with them remains to be done.
“Allianz is always exploring new opportunities on the continent,” Traoré Maïdou says. “The group has invested 600 million euros in Africa over the past two years and we will continue to do so.”
Allianz’s decision to refocus on its strongest African markets looks like good sense as capital requirements increase. Overtaking the continent’s major insurers may be too much of an ask.