By Emmanuel Oluebube, Correspondent UK

For several years, the sub-Saharan Africa (SSA) reinsurance market, though limited in scale by global standards, has provided reinsurers with an opportunity for diversification and profitable growth. However, according to an AM Best report, increasing economic volatility and elevated competition have led to a gradual deterioration in performance.

In a new Best’s Market Segment Report, “Sub-Saharan Africa Reinsurance: Significant Growth Potential, Despite Challenging Operating Conditions”, AM Best points to the impact of the COVID-19 pandemic on local economies, volatility in global oil prices, and in some countries by high inflation rates and local currency depreciation as contributing to the difficult operating environment for domestic and international reinsurers.

The report also notes that levels of inequality across the region have worsened during the COVID-19 pandemic, in some cases resulting in local pockets of social unrest ‒ including widespread rioting in South Africa, the region’s largest insurance market. This is expected to result in significant losses for the reinsurance industry.

Despite the challenges, AM Best believes the growth potential for the SSA reinsurance segment remains substantial. The region has considerable and untapped reserves of natural resources, solid long-term projected economic growth rates, and increasing underlying insurance penetration.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.