As Africa intensifies efforts to create a single continental market under the African Continental Free Trade Area (AfCFTA), concerns are growing that the continent’s insurance industry may lack the capacity needed to support the scale of trade, investment and infrastructure development envisioned under the agreement.
Industry stakeholders say that while AfCFTA is expected to unlock a market of about 1.5 billion people with a combined gross domestic product (GDP) estimated at $3.4 trillion, the success of the initiative will depend not only on removing trade barriers but also on the ability of African insurers to absorb and manage the risks that accompany increased cross-border commerce.
Speaking at the 52nd Conference and Annual General Assembly of the African Insurance Organisation (AIO) in Cairo, Egypt, Kanayo Awani, executive vice president for Intra-African Trade and Export Development at Afreximbank, warned that Africa’s trade ambitions could be constrained by low insurance penetration, fragmented markets and limited risk-retention capacity.
Addressing delegates on the theme, “Insurance as an Enabler of Economic Growth for All: Taking Advantage of Free Trade Across Africa,” Awani described insurance as one of the most critical, yet often overlooked, pillars of economic integration. According to her, insurance provides the confidence businesses, investors and financial institutions need to operate across borders by protecting assets, mitigating uncertainty and facilitating access to finance.
Despite the opportunities presented by AfCFTA, she noted that insurance penetration across Africa remains between two and three percent, significantly below the global average of 6.8 percent. This gap, she said, continues to leave businesses exposed to risks while limiting the industry’s ability to support large-scale trade and investment activities.
The challenge comes at a time when economic activity across the continent is gaining momentum. Awani pointed to recent figures showing that Africa’s merchandise trade has rebounded to approximately $1.35 trillion, while intra-African trade has grown to $206.6 billion. Foreign direct investment inflows have also risen sharply, reaching $97 billion following a 75 percent increase.
She said these trends reflect growing investor confidence and underscore the opportunities emerging from regional integration. However, sustaining this growth will require stronger institutions capable of managing the complex risks associated with expanding trade networks.
“No nation can trade beyond the limits of its own capacity to carry risk,” Awani said, stressing that insurance remains fundamental to facilitating trade, securing investments and improving access to capital.
Industry experts note that virtually every stage of international trade depends on insurance protection. From cargo transportation and infrastructure projects to trade finance arrangements and foreign investments, adequate insurance coverage helps shield businesses from political instability, payment defaults, supply chain disruptions and currency volatility.
Without such protection, companies may be reluctant to pursue opportunities beyond their domestic markets, limiting the broader economic benefits expected from AfCFTA.
A major concern highlighted at the conference is Africa’s continued dependence on foreign insurance and reinsurance markets. For decades, a significant portion of African risks, particularly in sectors such as energy, aviation, marine and large infrastructure projects, has been transferred outside the continent.
According to Awani, insurers across Africa often cede between 70 and 90 percent of premiums in specialised sectors to offshore reinsurers due to insufficient local underwriting capacity. This practice, she argued, not only results in substantial capital outflows but also slows the development of local expertise and weakens the industry’s ability to support increasingly sophisticated transactions.
As African economies seek to industrialise and attract larger volumes of investment, stakeholders warn that the inability to retain more risks within the continent could undermine efforts to achieve the full objectives of AfCFTA.
“A continent assembling itself into one market cannot remain a patchwork of small, fragmented and undercapitalised pools of risk,” Awani stated.
Beyond capital constraints, she identified fragmented regulatory systems as another major obstacle to the growth of Africa’s insurance sector. Diverse regulatory frameworks across countries create operational complexities for insurers seeking to expand regionally and limit the emergence of strong pan-African insurance providers.
Awani argued that harmonising insurance regulations under the AfCFTA framework would enable insurers to operate more seamlessly across borders, achieve economies of scale and build the capacity required to support large infrastructure projects and cross-border trade transactions.
She also pointed to broader structural challenges, including weak capital markets, limited access to reliable risk data and low levels of financial inclusion, all of which continue to hinder insurance sector development across the continent.
To address some of these challenges, Awani highlighted several initiatives being championed by Afreximbank to strengthen intra-African trade and financial integration.
Among them is the Pan-African Payment and Settlement System (PAPSS), which currently connects 27 countries and more than 180 banks and fintech companies, helping to reduce transaction costs and settlement delays associated with cross-border payments.
She also cited the Trans-Africa Bond Alliance and AfrexInsure as strategic platforms aimed at deepening African underwriting capacity, facilitating trade finance and retaining a greater share of insurance premiums within the continent.
Established in 2022, AfrexInsure has already supported transactions in more than 25 African countries, providing over $20 billion in insurance coverage while prioritising African underwriting capacity before seeking support from markets outside the continent.
Awani urged insurers, reinsurers, regulators, brokers and financial institutions to collaborate more closely in building stronger African institutions capable of supporting the continent’s growing trade and investment aspirations.
“History will not remember us for the agreements we signed alone. It will remember whether we built the machinery beneath them; the systems that allow traders, manufacturers, investors and entrepreneurs to operate with confidence across Africa,” she said.
She maintained that insurance should no longer be viewed as a peripheral financial service but as essential economic infrastructure that lowers the cost of capital, improves project bankability, supports trade expansion and enables sustainable economic growth.
“There comes a moment in the life of every economy when it must learn to carry more of its own risk. For Africa, that moment is now,” Awani added.
Industry stakeholders say that unless African insurers significantly strengthen their capital base, improve risk-retention capabilities and operate within a more harmonised regulatory environment, the continent’s ambitious vision of a unified $3.4 trillion market could face significant constraints.
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