The African Insurance Organisation, AIO, has highlighted benefits of the insurance sector with the effective implementation of the African Continental Free Trade Area (AfCFTA) agreement.
At the 25th African Insurance Forum, which opened in Kigali, Rwanda on November 27, President of the AIO, Tope Smart, said the AfCFTA, will create the largest free trade area in the world measured by the number of countries participating.
The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion according to the African Union.
It has the potential to lift 30 million people out of extreme poverty but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.
The 25th African Reinsurance Forum, discussions will centre around the theme INSURANCE INTEGRATION IN THE CONTEXT OF THE AFRICAN CONTINENTAL FREE TRADE AREA.
Smart said the forum will examine not only how the insurance sector can best integrate into the AfCFTA, but to also provide a conducive venue for the cream of the African insurance industry to reflect on the way forward.
Through this event, the AIO would highlight the contribution of the African insurance industry to the realisation of this lofty idea, whose benefits to the entire African continent cannot be overemphasized,said the President.
In concrete terms, the AfCFTA emphasizes the reduction of tariffs and non-tariff barriers, and the facilitation of free movement of people and labor, capital, right of residence, right of establishment and investment.
According to Smart, “In September this year, the Africa Insurance Pulse, a research publication of the AIO, carried out an extensive study on the African Continental Free Trade Agreement.
In the findings, insurance executives interviewed hope that in the long term the successful implementation of AfCFTA will benefit all markets.
In the short to medium term, however, they expect that the large markets such as South Africa, Morocco, and Kenya will benefit most.
When asked which insurance players will be the «winners», the clear answer with 46% is the African regional insurance/reinsurance players such as Africa Re, CICA Re, Sanlam and Santam. According to the executives, they have a better starting position than all other players because they already have a well-established and tested distribution network across several countries, which will be reinforced with the single market approach.”
He said that Insurance and reinsurance players that participated in the survey were optimistic about their future in the context of the AfCFTA, adding that 75% do not believe the single market will become a threat to their business.
He said that many reinsurers and global and regional insurers confirmed that they already operate under the logic of a single market and many sharing the belief that the insurance pie will grow with the single market, facilitating the expansion beyond their current reach of active markets.
“Reinsurers that are active primarily in one or a few markets see this as a unique opportunity to diversify their risk portfolio. To get prepared, two-thirds of interview partners stated that they already reflected the impact of AfCFTA into their strategic planning, while the remaining group is waiting to gain more information on the impact of the free trade on them.” Smart said.
He explained that the AIO’s goal for setting up the reinsurance forum is to encourage the exchange of business through bilateral contacts and discussions which fall in line with the organisation’s objective of promoting inter-African cooperation and the development of a healthy insurance and reinsurance industry in Africa.
“Since the inception of the Reinsurance Forum, there has been a lot of exchange of business among African industry practitioners but there is still much room for further deepening of the business exchanges.” he observed.
According to him, the 25th Reinsurance Forum gives operators another golden opportunity to examine some of the inherent challenges facing the African insurance industry, as he urged them to use it and do an objective dissection of the theme.