The sharp slowdown in China’s economic growth has had many effects – some of them predictable, such as tales of disinvestment from the country, and some of them unpredictable.
One of the less predictable outcomes appears to be MENA reappearing on the radar screens of the world’s biggest (re)insurance companies.
Admittedly, Africa has been touted as the ‘next big thing’ for the past 30 years or more, but this time it could be different because the incentive to make up revenues that have disappeared from doing business in China is a strong one.
Perhaps the best recent example of this Prudential, whose CEO Anil Wadhwani has indicated that Africa is the next market it will be focusing on for long-term growth. The carrier presently works in eight African markets, all of which have shown double-digit percentage growth since the start of the year.
Mr Wadhwani’s optimism sounds uncannily like the same cheery outlook that the MENA region’s investment banks were touting 10 years ago when they spoke of the ‘Africa-Asia growth corridor’ that runs from South Africa at one end to India at the other, in a vast swathe of untapped growth markets.
Mr Wadhwani told the Financial Times at the start of September that African markets had the same growth characteristics as markets in Asia where the insurer had had most success – principally fast-growing populations, increasing wealth and a thirst for insurance.
“We believe that over a period of time, Africa will provide us with that growth opportunity, as the markets mature, as the customers get a lot more aware of wanting and needing insurance as part of their protection, health coverage, as well as savings need,” Mr Wadhwani said to the newspaper.
While there are sceptics who think that Prudential’s ambitions are overblown, there can be few serious observers who do not recognise the nascent potential of the broader MENA region as an insurance growth market.
This is a market of almost 600m people with insurance penetration rates that show that significant growth is both practical and achievable.
Some global (re)insurers have been focusing on MENA for many years, they tend to look to the UAE, Saudi Arabia, Bahrain, Egypt, Oman, Lebanon, Morocco, Algeria and Tunisia. These and other markets are a very long way from insurance saturation.
While domestically-owned insurers may be wary of increased attention in the region from the big global players, the reality is that domestic insurers with successful track records already have brands that are trusted and entrenched. It will not be easy to topple them.
Perhaps more importantly, experience has shown that greater competition leads to greater awareness of insurance and the important role that it plays in expanding the size of the market. A bigger market should mean a bigger share for all players and that can only be a positive.
Of course, there are still some clouds on the horizon – such as inflation and high interest rates – but the sensible approach is to learn to live with them. They will be around for some time to come. M
Paul McNamara
Editorial director
Middle East Insurance Review