More than 15% of South Africa’s gross domestic product (GDP) was accounted for by insurance premiums in 2013, making it the country with the second-highest insurance penetration in the world, according to PwC.
With a very mature insurance market, products remain concentrated among a much smaller proportion of the population than in other countries.
Notwithstanding, South Africa’s insurance market accounted for nearly 75% of the total premium written across Africa in 2013.
With a population of 171 million and a GDP in 2013 of $509 billion (South Africa’s GDP was $351 billion that year), Nigeria generated just $1.9 billion in insurance premiums – a mere 0.6% of its GDP.
Kenya’s insurance market generated $1.5 billion of insurance premiums in 2013, contributing 3.4% to its $53 billion GDP.
At $72.4 billion, insurance premiums across Africa accounted for a little more than 3% of the world market, which in 2013 recorded premium income of more than $2 trillion.
Although insurance premium growth on the continent was flat from 2012 to 2013, PwC’s Victor Muguto said there’s hope that newfound wealth in fast-growing African economies will increase the demand for insurance on the continent.
Coupled with rapid urbanisation, the number of insurable assets and lives is predicted to grow considerably on the continent, Muguto, who is PwC South Africa’s long-term insurance leader, said.
“Also, improving governance and relative economic stability bode well for insurance growth in the rest of Africa in the future,” he said.
SA insurers face stiff competition in Africa
Subdued economic growth in South Africa means local insurers are looking north of our borders for growth. “Contributions from the rest of Africa need to increase and I think they [local insurers] are all doing a lot to try and make their acquisitions and diversify their businesses,” Muguto said.
However, high levels of penetration in home markets and increased demand for insurance in Africa will increasingly attract developed market peers.
That competition for insurance business is increasing across Africa is reflected in the fact that South Africa’s major insurance groups with operations in the rest of the continent saw a 22% reduction in the value of new business (VNB) written in 2014. This drop followed year-on-year growth in the previous two years.
“The only exception was Sanlam, whose VNB increased by 20% to R280 million,” PwC said.
Dewald van den Berg, insurance technical director at PwC South Africa, said this was partly attributable to currency fluctuations and the increased cost of capital as insurers wrote higher risk business.
Sanlam’s rest of Africa contribution to VNB in 2014 was the highest of its peers at 22%. Old Mutual’s rest of Africa contribution to VNB was 14%, followed by MMI Holdings at 6% and Liberty at 3%. 
Van den Berg said Africa would not remain South Africa’s “playground” but was going to be “a world stage in terms of competition”. “We are seeing moves in the regulatory environment to improve capital requirements, which will add to business complexity in the rest of Africa,” he commented. 
South African insurers face competition from the likes of AXA, Prudential and other European insurers, many of which have bigger balance sheets and more sophisticated underwriting models, said Muguto.
“The focus is there from an Africa perspective; all four have put out their wallets. I believe they can compete, but they need to run very quickly because the European AXA’s and Prudential’s are fast movers as well,” Muguto said.