New research suggests the insurance industry in the Central African Republic (CAR) is set to grow at a CAGR of 10.7% between 2012 and 2017, making it an attractive proposition for foreign investment. Stable economic development, the continued expansion of the mining industry, and a host of modernising infrastructure projects is contributing to significant growth in the CAR’s insurance sector.
Despite the substantial obstacles yet to be overcome – primarily a lack of public awareness regarding insurance products, and the low life expectancy that limits demand – the insurance market’s projected growth remains healthy. The industry’s small market size, with insurance penetration standing at only 0.36% in 2012 – in comparison to the global average of 6.8% – provides new market entrants willing to tackle these challenges with substantial positive growth potential.
Key market insights include:
Stable economic development to support insurance industry expansion
The performance of a nation’s insurance industry is closely correlated with its economic growth; thus, the stable economic development of the CAR spurred an increased demand for insurance from 2008-2012: a trend that is set to continue. This is in no small part thanks to the nation’s burgeoning mining industry, and a range of infrastructure investment, including the laying of fibre-optic cable, the modernisation of transport routes, and improvement of energy capacity.
Low rates of insurance penetration to attract new business
Despite the CAR’s rising insurance penetration rates, total penetration in 2012 remains low – at 0.36% – compared to the global average of 6.8% Thus, the CAR represents an excellent opportunity for new market entrants to experience substantial positive growth.
Low life expectancy and lack of public awareness limit the demand for insurance
World Bank statistics show the CAR as having one of the lowest life expectancy rates in Africa, at only 48.3 years in 2011. This limits the demand for health, pension and life insurance coverage – a factor that is compounded by a lack of public awareness with regards to insurance products. Addressing this latter concern should be a high priority of insurers in the CAR.
High combined ratio in life insurance segment
A combined ratio of more than 100% reflects underwriting losses. The life insurance segment recorded a high combined ratio from 2008-2012, reaching a peak of 249.8% in 2009. A substantial improvement in the quality of underwriting must therefore take place to curb these losses.
Timetric’s report, ‘The Insurance Industry in Central African Republic, Key Trends and Opportunities to 2017’ is available at: https://timetric.com/research/report/IS0249MR/
