Amid a backdrop of slowing economic growth, the crowded insurance sector looks set for increased competition with a spate of new acquisitions and entrants from foreign investors, including Barclays Africa and IVM Intersurer.
October 2015 saw IVM Intersurer, the Dutch parent company of South Africa’s Hollard, acquire a 51% stake in Ghana’s Metropolitan Insurance Company. With a 9% market share, Metropolitan was the country’s fourth-largest general insurer.
The move follows a number of other major acquisitions by foreign insurers in the local market, including the purchase of a 40% stake in Enterprise Insurance – a non-life insurer, by South Africa’s Sanlam Emerging Markets in 2014; and the sale of controlling interests in both Express Life and Provident Life Assurance to UK-based Prudential Insurance Company and South Africa’s Old Mutual respectively in 2013. Leapfrog Investment acquired a majority stake in UT Life in 2016
Barclays Ghana, which currently offers a range of products through its bancassurance window, has also indicated that it will establish its own standalone insurance company before the year’s end.
The expansionist moves by foreign firms are expected to further drive up competition in the sector, which already has 25 non-life companies and 21 life providers. The sector has grown significantly in recent years, with a compound annual growth rate of roughly 30% in the five years between 2009 and 2013 – a figure that is nearly three times that of neighbouring Côte d’Ivoire. The life insurance market alone is expected to reach US$462million in value by 2019, more than double its 2014 value of US$224.8million.
The high growth is in part a result of the sector’s low base. Insurance only contributes just over 1% to Ghana’s GDP (by comparison, it represents 3.1% in Kenya) and has a penetration rate of just 2%. The high growth has attracted more than just foreign firms: 42% of all Ghanaian insurers profiled by Asoko were established after 2005.
However, the sector is highly concentrated with just five firms – SIC Life, Enterprise Life, Starlife, GLICO Life and Metropolitan Life – accounting for more than three-quarters of the life sector’s gross premiums. Overall, for both life and non-life, five insurers – SIC, Star, Enterprise, Metropolitan and Vanguard – hold 60% of the sector’s premiums.
The market saturation led to insurers reducing their premiums to dangerously low levels, increasing solvency risk and prompting the National Insurance Commission (NIC) to introduce the ‘No Premium, No Cover’ requirement in April 2014. The rule strengthens requirements that insurers hold sufficient capital to support potential pay-outs.
www.asokoinsight.com – African corporate data