Africa Insurance M&A: Global Insurers’ Next Frontier


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By Geoffrey P. Burgess, James C. Scoville, Benjamin Lyon, Sayo Ogundele, Debevoise and Plimpton LLP

The insurance industry in general, and M&A opportunities in Africa, are still in their infancy, and this brings a range of opportunities for international insurers and investors. In contrast to more developed markets, most international insurers have little or no presence in Africa. This helps to explain the fact that Africa’s global market share in the insurance sector is roughly around 1.5%, and the continent’s average insurance penetration rate is 2.9%, falling to 0.9% excluding South Africa.

These figures stand in even greater contrast compared to the rest of the developed and developing world because according to some metrics, the economic and corporate governance climate appears to be generally favourable for the development of insurance products in Africa and for companies looking to invest there. GDP in sub-Saharan Africa is forecast to grow between 2.6% and 3.2% by 2018, foreign direct investment has increased by 5% to $50 billion over the past 15 years, and research suggests that a growing middle class is emerging who expect, and can afford, different categories of products from insurers as a consequence of a rising GDP per capita across Africa. Cutting against these favourable trends, it is estimated that falling commodity prices will cut growth across sub-Saharan Africa by 1% to around 4%, the slowest rate since the late 1990s. For example, in Nigeria, oil still accounts for roughly 70% of the country’s annual budget, leaving government spending highly dependent on global energy prices.

Meanwhile, the corporate governance, risk management and capital standards in many African countries are being strengthened, mirroring similar efforts being rolled out globally. For instance, European Solvency II – like regimes are being implemented in South Africa and Kenya, bringing new capital and risk management requirements to insurers located there. Like elsewhere around the world, these new standards present opportunities to acquirers (for instance, if particular business lines are now suddenly more expensive for their current owners to hold), but difficulties for deal-making as well, as acquirers need to understand the new requirements and their impact on valuation and operations.

This article provides an overview of recent M&A activity in the insurance sector in Africa, including commentary on some of the key themes that we have identified. We also summarise some of the main regulatory and compliance issues that an international investor may face when investing in Africa, as well as provide a more in-depth view on the insurance markets in Kenya, Nigeria and South Africa.