AM Best: Sub-Saharan reinsurers post strong results despite economic headwinds

Sub-Saharan Africa’s (SSA) reinsurance market remains resilient amid inflation, currency pressures and sovereign defaults, with local players posting robust underwriting profitability, according to AM Best.

The region’s reinsurers have maintained “robust underwriting results” despite years of macroeconomic volatility and external shocks, according to the insurance credit ratings firm’s latest market segment report.

Best’s analysis found that stronger pricing, stricter risk selection and improved investment diversification have helped the region’s reinsurance segment deliver “another year of double-digit return on equity”.

“SSA reinsurers have been resilient amid these complexities,” the report said.

“They have leveraged the recent global hardening of reinsurance pricing, reporting another year of robust underwriting profitability.”

While inflation across the region has eased from 7.1% in 2023 to 4.5% in 2024, AM Best said high debt burdens and currency volatility continue to test balance-sheet strength and capital adequacy.

“The series of sovereign defaults witnessed since the Covid-19 pandemic has highlighted the importance of geographical diversification and prudent investment management,” the report said.

“Exchange rate volatility has tested the soundness of asset-liability management strategies.”

Many African reinsurers have started investing surplus assets offshore to reduce exposure to domestic instability, the report observed.

However, AM Best said the region’s available capital remains insufficient to meet fast-growing insurance demand, noting that “the capacity offered by Africa-domiciled reinsurers remains insufficient to meet market demand and local players often rely on support from global reinsurers”.

The study also found that reinsurers had benefitted from protective local regulations and relatively low catastrophe risk, though the growing incidence of secondary perils is challenging this assumption.

According to Gallagher Re data cited in the report, natural catastrophes caused $9bn in economic losses across Africa in 2024, up from a 10-year average of $6bn.

“The need to expand the provision of insurance protection across the continent could present organic growth opportunities for the region’s reinsurers,” AM Best said.

It added that reinsurers “will be well-placed to withstand these challenges”, provided they maintain diversification and prudent risk management.

Over the long term, the agency expects “substantial potential for continued and profitable growth”, driven by natural resource wealth, rising insurance penetration and improving economic stability, AM Best added.