Africa needs local and global expertise

Infrastructure cover essential to sustain pace of economic growth in Africa

The international market has long provided infrastructure insurance across Africa, but a step change in capacity levels is needed if the demand for cover is to be met

Africa’s insurance growth potential is both underestimated and misunderstood. Its insurance industry is estimated to be worth almost $70bn gross writ- ten premium, according to recent research by McKinsey. Before the pandemic, the insurance market was projected to grow at a com- pound growth rate of 7%, nearly twice as fast as North America and three times faster than Eu- rope. With this growth rate expected only to be delayed rather than halted by the pandemic, we are likely to see the insurance growth rate power back up as the world economy recovers.

It is wrong to see a single “African” market. As a continent of more than 50 countries it has diverse levels of economic development and any number of insurance entities. However, across the entire continent, infrastructure development and energy projects are key economic drivers and are powering non- life insurance growth.

Poor infrastructure is a major barrier to economic growth across Africa and as a result many governments are making significant efforts to ramp up infrastructure and energy projects and increase foreign investment.

Chinese investment

These efforts by African governments are being given extra impetus by Chinese investment. The Belt and Road Initiative is focused on signing up African countries to infrastructure projects including the construction of roads, train routes, airports, ports, power grids and highways and will see billions of dollars invested over the coming years to add to existing initiatives that have been in place since the plan’s announcement in 2013.

Substantial foreign investment is also coming from other countries in Asia too, with South Korea making significant investments. Although Western investments are likely to shift away from more traditional energy projects in the coming years to a greater focus on renewables, there is no doubt Africa’s rising power demand will see it retain a heavy reliance on fossil fuels for the near term.

The international insurance industry has long been involved in the provision of infrastructure insurance across Africa, but a step change is needed if the demand for cover is to be met.

There is no doubt increased cover is needed to protect infra- structure investment projects. In one recent case, a challenging security situation in the Cabo Delgado region of Mozambique has seen the significant investment into liquefied natural gas projects by energy majors suffer from delays to construction and operation during 2020. While

insurers cannot control these events or eliminate all risks, they can be mitigated with the right risk management strategies in place.

Demand for comprehensive cover is high. And while it is understandable there has been some caution among the international underwriting community when underwriting large African specialty risks, this caution needs to be overcome. With the addition of specialist local risk management and broking resources on the ground to deliver the detailed risk data, information and analysis, barriers can be overcome, and the risk underwritten.

Aside from the traditional capacity providers in London and Europe there is a real interest from the Middle East and Asian markets in supporting opportunities and growth in Africa. This also supports the individual African markets and South Africa where there is a hub of expertise and capacity that already looks across borders.

Locally delivered solutions

The introduction of Chinese investors is also driving more interest in local and international insurance solutions as historically Chinese-owned risks have looked to mainland China for cover but there is now a growing understanding of the opportunity of bringing risk management and cover closer to where the infrastructure project is.

Overseas investors clearly see the benefits of a locally delivered insurance solution but, with complex risk exposures or high limits and aggregations, they need the reassurance of being able to access the best-in-class insurers internationally.

Working in partnership with pan-African risk advisers such as TRM Risk Management, and international brokers such as Oneglobal, can maintain the high level of local service that international clients need and also ensure the infrastructure or energy developer in each country can access specialist international wholesale or reinsurance advice.

Low levels of insurance penetration across the continent present a huge opportunity for local and international insurance markets alike. As the infrastructure gap closes, new risks will emerge as construction risks become operational and require ongoing insurance protection and risk management strategies. Offering meaningful solutions requires collaboration between international insurance market specialists and expert local risk advisors working on the ground, right where the client is.

There is huge growth opportunity in Africa across many industries and product lines and working with strong risk partners is key to unlocking the potential.


This article written by Duncan Urquhart, Executive Director of Oneglobal Broking in London, and James Hill, Chief Operating Officer of TRM Risk Management in Johannesburg,  first appeared in Insurance Day. 



Get in touch

We are here to help and would love to hear from you. To speak to one of our specialist team please get in touch via our contact page.