AVIATION
INSURANCE
FEATURE
May 2021
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Introduction
INTRODUCTION The African aviation insurance market is undergoing a period of profound transformation which represents a fantastic opportunity for those ready to take advantage of the market changes. A recent McKinsey report notes that prior to the impact of COVID-19, the insurance market was expected to grow at compound annual growth rates (CAGRs) of 7 percent per annum between 2020 and 2025, nearly twice as fast as North America, over three times that of Europe, and better than Asia’s 6 percent. Africa’s insurance industry is valued at about $68 billion and is the eighth largest in the world—although this is not equally distributed across the continent. Markets are inconsistent in terms of size, mix, growth, and degree of consolidation, with 91 percent of premiums concentrated in just ten countries. As the market resolves into a post-Covid “newnormal” it is those insurers and brokers who have positioned themselves best who will come to dominate the new normal. This will require pro-active marketing.
May 2021
This introduction outlines the current state of the diverse African insurance market and the trends that are shaping it, and articulates five imperatives for achieving success on the continent. A strategic approach that takes into account the unique characteristics of African markets and looks to collaborate with regulators to drive reform and safeguard consumers could unlock significant value not just for industry players but for society more broadly at this critical time. GROWTH POTENTIAL The African insurance market’s immaturity points to significant scope for growth. There are six primary insurance regions in Africa with South Africa constituting around 70 percent of premiums.
Af r ic a’s insurance industr y is valued at about $68 billion
With the continent now battling the novel coronavirus, McKinsey’s modelling in South Africa and recently published financial results across the continent indicate that these projections are likely to take a knock over the next three years. The pandemic is profoundly affecting both lives and livelihoods, and consumers are cutting back on discretionary expenditure—including insurance—in the face of income and market volatility. However, this impact is expected to delay rather than alter
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the pattern and potential of future growth. And in some cases, the crisis may accelerate existing trends—notably the shift toward digital and remote channels, which has the potential to offer new opportunities to both insurers and consumers.
The level of maturity in these six regions is low, relative to global reference countries, as measured by insurance density (premium per capita). While most African countries have experienced double-digit insurance growth in CAGR in local currency over the last five years, this has mostly been driven by economic growth, rather than deepening market penetration. Levels of insurance penetration in Africa are half the world average measured as a percentage of GDP, and premiums per capita are 11-fold lower than the world average. This points to significant scope for growth. Across the continent, distribution channels
also vary by region as well as between life and nonlife products. Brokers and agents remain the most prominent channels, although direct sales and bancassurance have increased their share. For example, in the Ghanaian life-insurance market, the bancassurance share of premiums has almost doubled from 7 percent in 2015 to 13 percent in 2019. Ensuring long-term growth prospects through Pan-Africanization In the past six years, established insurers have tended to diversify across the continent. And expansion is likely to continue with further investment in Africa. While regional players will possibly benefit from greater integration as a result of expansion, for international players such as Sanlam, Allianz, Old Mutual, and AXA, the primary goal is to capture long-term growth. Sanlam, for example, has, through the purchase of Saham, gained a foothold in more than half of all African countries, and a top five position in six markets outside of South Africa, while Allianz
has made acquisitions in Morocco, Nigeria, and, more recently, Kenya. French multinational AXA has a presence in nine African countries, while Old Mutual has a presence in 13 African markets. CONCLUSION The global pandemic has created uncertainty and economic pressure across the continent, but the fundamentals for insurance growth remain solid. Now is the time to think more deeply about refining a strategic approach that leverages partnerships and is selective about which geographies to target while driving innovation across products and channels, expanding services, and upskilling the workforce. Assisted by these choices, insurers will be strongly positioned to take advantage of the vast—and underpenetrated—African markets, helping to unlock greater security for consumers and contributing to social and economic security on the continent. j
Your Asset – Our Highest Priority Azriel Aviation Africa, specialist Aviation Underwriting Managers, in partnership with Constantia Insurance Group, forms a powerhouse in the Aviation, Short-Term and Life Insurance markets.
Contact Jan Coetzee: 082 604 5127 jan@azrielaviation.co.za
Client-focused solutions provide innovative insurance for jets, turboprops, all fixed-wing and rotor-wing aircraft, as well as hot air balloons and all related aviation liabilities.
www.azrielaviation.co.za
We’ll put you in touch with one of our specialist brokers.
Lesoba 18798
AVIATION AFRICA
An Authorised Financial Services Provider FSP No. 43029
An Authorised Financial Services Provider. FSP No. 31111.
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Property and Aviation Insurance Brokers (PAIB) are your Aviation specialists • We are aviators , PPL licensed and CPL subject qualified since 2004. • We understand the liability, risk, technicalities and CAA requirements facing our aviators in South Africa. Move to a Broker who is a pilot and understands your requirements. PAIB is an Authorised financial service provider 13367 offering cover with all major underwriters. j
paulcormack@propertyinsurancebrokers.co.za
www.propertyinsurancebrokers.co.za propertyinsurancebrokers
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May 2021
SA Flyer 2021|05
Companies
Paul Cormack
AVIATION INSURANCE
TO MEET YOUR REQUIREMENTS
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ith more than 50 years of experience, Genesis Insurance Brokers has established itself as one of South Africa’s leading aviation insurance Brokers. Our expertise and commitment ensure you can always count on us when you need it most. We understand that every risk is unique, which is why we make use of multiple Insurers to ensure that you get the best deal, and that every aspect of your risk is adequately covered. Contact us today for an obligation free quote to insure your Aircraft. T: +27 11 789 7845 | E: info@genesisib.co.za W: www.genesisib.co.za
Genesis Insurance Brokers is an authorised financial services provider (FSP 14995)
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Companies
DJA Aviation DJA Aviation was formed over 40 years ago by Dennis Jankelow and to this day remains South Africa’s foremost specialist aviation insurance brokerage, offering the greatest concentration of aviation insurance experience and expertise on the African continent and continuing to lead the market in the areas of product innovation and technical development. DJA Aviation creates aviation insurance programmes for its clients that are perfectly balanced in the critical areas of cost, coverage, service and security. In addition, DJA Aviation’s long-standing and close relationships with the insurers who underwrite its products – locally, regionally and internationally – ensure that a DJA Aviation client is in the best possible hands when losses occur. DJA Aviation is an authorised Lloyd’s correspondent and has conducted aviation insurance business at Lloyd’s for more than 40 years, a relationship that is strengthened by regular visits to the Lloyd’s market by DJA Aviation’s key personnel. DJA Aviation is an Authorised Financial Service Provider (FSP No 15808) and a proud member of the iCapital Group. DJA Aviation’s social responsibility programme includes on-going support for the South African Guide Dogs Association for the Blind.
Contact DJA Aviation on: Tel: 0800FLYING (0800 359-464) Email: mail@dja-aviation.co.za Website: www.dja-aviation.co.za
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