New Investments And Tie-Ups As Insurers Target Rising Incomes In Africa

A shake-up in Africa’s insurance market is underway as rising incomes drive new investments, offering increased coverage across the continent.

Seth Onyango, bird story agency

Insurance firms are shifting tact in a fresh push to sign up new policyholders as disposable incomes begin to surge across Africa.

 

Allianz Europe BV, a subsidiary of Allianz SE, recently raised its stake in SanlamAllianz Africa Proprietary Limited to 49% as it bolsters its foray into the continent.

Sanlam and Allianz inked their tie-up last year, with plans to launch in multiple countries, including Senegal, Côte d’Ivoire and Cameroon.

 

SanlamAllianz now covers 27 countries in Africa, solidifying its presence in 12 overlapping markets.

 

Their tie-up merges Sanlam’s regional dominance with Allianz’s global scale, targeting one of the world’s least-penetrated insurance markets, where premiums make up just 3% of global totals, with South Africa the only market with two-digit sign-ups.

In a parallel move, Africa Specialty Risks (ASR) has launched the Baobab Consortium, the first Lloyd’s-backed initiative for Africa and the Middle East.

Operational from January 1, Baobab is the first Lloyd’s-backed initiative focused on Africa and the Middle East.

It brings US$21 million in capacity to address risks such as political instability, trade credit, and energy projects—areas that have historically deterred investment.

“Africa and the Middle East offer deep pools of opportunity for insurers but require specialist local knowledge and tailored underwriting solutions,” said Mikir Shah, CEO of ASR, in a statement.

Baobab, he added, “increases access to local markets while providing developing economies with additional global insurance capacity.”

Africa’s insurance sector has remained underdeveloped despite the continent’s growing middle class, urbanization, and rising infrastructure investments.

McKinsey estimates that insurance premiums in the region will double by 2035, driven by increasing financial inclusion and demand for risk coverage.

SanlamAllianz aims to capitalise on this growth by tailoring products to local markets, from microinsurance for underserved populations to complex business policies.

Its rollout is expected to create a blueprint for tapping into a market often viewed as fragmented and risky.

Baobab, meanwhile, is taking a complementary approach. By focusing on high-risk, high-reward sectors like construction, energy, and political risk, it targets areas crucial for economic development.

The consortium’s model leverages Lloyd’s Syndicate 2454 to deploy capital efficiently across Africa and the Middle East, opening a pathway for other global insurers to enter these markets.

Insurers are also moving beyond traditional models to address the complexities of operating in Africa.

SanlamAllianz’s partnership combines Sanlam’s local expertise with Allianz’s global underwriting capabilities, creating a platform to navigate regulatory and operational challenges.

Baobab, meanwhile, uses ASR’s distribution networks in Mauritius, Morocco, Bermuda and Dubai to bridge the gap between global capacity and local needs.

The focus on specialised solutions marks a shift in how insurers view Africa. Political risk, trade credit, and terrorism coverage, once seen as unprofitable, are now seen as opportunities to unlock growth.

Shah emphasised Baobab’s role in “accelerating sustainable economic growth” by providing coverage that supports infrastructure and trade projects.

Regulatory fragmentation in Africa, limited financial literacy, and uneven access to financial services have long hindered growth. However, new investments are starting to address these barriers.

In March 2023, the Competition Tribunal approved Santam’s acquisition of MTN South Africa’s device insurance policies and related assets underwritten by Guardrisk Insurance Company Limited.

The following month, it approved Sanlam’s takeover of AfroCentric Investment Corporation, giving Sanlam full control of the AfroCentric Group and its majority stake in ACT Healthcare Assets.

SanlamAllianz is expected to advance microinsurance offerings to expand coverage in rural and underserved areas, while Baobab’s focus on large-scale risks could stabilise volatile markets and attract foreign direct investment.

Both initiatives highlight the importance of adapting to local needs rather than applying one-size-fits-all solutions.

A McKinsey report notes that the continent’s fragmented market presents opportunities for insurers willing to innovate. “Success will depend on scalable, tailored models that account for Africa’s diverse needs,” the report states.

The insurance sector’s evolution is poised to play a critical role in Africa’s economic growth. By reducing risks tied to infrastructure projects, trade, and social mobility, insurers enable investments that create jobs and build resilience.

Baobab’s US$21 million capacity may be modest compared to global standards, but its targeted approach sets a precedent for other syndicates.

Source: norvanreports.com