Joy Agwunobi
Africa’s insurance market is entering a defining phase as industry players confront a mix of disruptive forces reshaping risk, distribution, and capital strategies across the continent. A new report by global management consulting firm Kearney projects that insurers in Africa must reinvent operational and market approaches to remain relevant in a rapidly changing landscape.
The study titled “The State of African Insurance in 2025” highlights a sector pressured by climate-related shocks, socioeconomic instability, and sweeping regulatory reforms, yet energised by unprecedented digital adoption and new partnership ecosystems.
Kearney observes that the industry continues to operate in structurally underpenetrated markets despite slow improvements. Insurance penetration in Africa remained below 3 percent in the second half of 2024, far below the global average of 6.8 percent. “South Africa remains the clear outlier at about 11.5 percent. The remainder of the continent, however, faces significant coverage gaps that leave households and businesses exposed to financial shocks,” the report noted.
Those vulnerabilities were amplified in 2024 as devastating floods in Sudan, severe cyclones in East Africa and mass displacement incidents in Chad and Malawi generated more than $500 million in economic losses. However, less than 1 percent of those losses were insured. Kearney warns that this widening mismatch between intensifying systemic risk and low insurance penetration poses a direct threat to market resilience.
Mobile-led distribution becomes a commercial priority
Digital transformation represents the biggest lever for market expansion. By 2025, sub-Saharan Africa is expected to reach more than 600 million unique mobile subscribers, nearly half the region’s population, creating fertile ground for technology-enabled distribution models.
According to the report, the logic of digital distribution in Africa is shifting away from ownership of digital platforms toward orchestrating partnerships and integrated ecosystems. Kearney argues that insurers must define viable digital routes to market aligned with their strengths, whether through strategic partnerships, white-label arrangements, or the development of proprietary channels.
“To compete, insurers should define a viable digital route-to-market based on their core strengths, whether through building, partnering, or white-labeling, that requires clear prioritisation, ecosystem design, and sequencing, areas where consulting support is critical to ensure execution is commercially viable, not just technically feasible,” the study noted.
Reform momentum accelerates, but execution remains uneven
The firm further highlighted governments across the continent are pushing reforms aimed at strengthening solvency, improving governance, and expanding access to insurance. Nigeria, Kenya, and Tanzania are among markets phasing in risk-based capital (RBC) frameworks to replace fixed minimum capital requirements. These reforms are aligned with international standards such as Solvency II and demand higher actuarial sophistication and stronger balance-sheet risk oversight.
Kearney notes that Nigeria’s 2024 Insurance Industry Reform Bill increased capital thresholds by four times across all business classes. This has already triggered consolidation moves, with several mid-sized insurers filing merger plans as part of recapitalisation efforts. The report indicates that insurers with strong capital bases now have opportunities to acquire distressed books or attract new institutional participation.
The consultancy emphasizes that meeting regulatory compliance is no longer sufficient. Companies should align product strategies with national policy priorities, including financial inclusion and broader access to health and agricultural insurance.
Additionally, a number of African countries are expanding state-led health coverage. Morocco has integrated millions of informal workers into public schemes, while South Africa’s National Health Insurance (NHI) Act proposes a gradual shift toward a single-payer model.
Kearney says that rather than compete with public systems, private insurers should position themselves as service integrators, delivering modular add-ons such as digital chronic care, employer-funded outpatient bundles, and faster diagnostics to meet customer expectations for convenience and quality.
Climate risk becomes a solvency issue
The report stresses that climate volatility has moved beyond a long-tail concern into a near-term capital threat. Reinsurers are tightening terms and raising prices for weather-sensitive exposures, while global regulators are advancing climate stress-testing for insurers to uphold capital adequacy.
Insurers in Africa, the report recommends,”should consider deploying forward-looking climate intelligence, enforce disciplined portfolio controls, and adopt diversified risk-transfer mechanisms, such as parametric instruments or catastrophe bonds, especially for agriculture and underinsured segments.”
Economic pressures weigh on coverage retention
Macroeconomic instability is exerting fresh pressure on policy retention across income categories. The report cites that South Africa recorded roughly 8.2 million lapsed risk policies in 2025 following affordability challenges worsened by inflation. Similar dynamics are playing out in Nigeria where the removal of fuel subsidies has driven sharp increases in living expenses, forcing households to reduce or cancel insurance cover.
Referencing Argentina as a parallel, Kearney argues that affordability must now be treated as a core design parameter. Insurers are encouraged to build ultra-low-cost, modular policies and adopt real-time pricing models that respond to income volatility.
A rising share of African governments is grappling with debt sustainability, leading to restructuring episodes such as Ghana’s recent debt overhaul. With insurers typically holding significant domestic bond investments, portfolio impairments are beginning to erode capital buffers.
To manage this risk, Kearney suggests insurers rethink investment strategies, including a shift toward regional infrastructure funds, creditworthy corporates, and diversified asset exposure more closely matched to liabilities.
Microinsurance matures into a scalable business engine
Once viewed primarily as a social inclusion tool, microinsurance is now demonstrating the potential for scalable, recurring revenue growth. Kearney references companies like Turaco which, as of mid-2025, has insured more than 3.5 million people across four African markets with median claims turnaround times of just hours.
These models successfully tap telecom channels, agribusiness supply chains, and employer partnerships, enabling insurers to build customer relationships in segments that traditional brokers often struggle to reach.
Insurers positioned to drive resilience and development
Kearney concludes that insurers have a strategic role to play in Africa’s sustainable growth agenda. Closing the continent’s protection gap will require modernising underwriting, expanding digital reach, and capitalising on new regulatory and climate-related risk opportunities.
The industry must also invest in actuarial capabilities, upgrade asset-liability risk frameworks, and build product ecosystems aligned to the realities of economic pressure and environmental uncertainty.
In its outlook for 2025 and beyond, the report urges insurers to move beyond incremental change and instead embrace resilience as a core market offering supporting climate adaptation, enabling inclusive financial protection, and creating commercially viable long-term growth.
Insurers urged to lead climate risk prevention as losses mount
Rising climate-driven losses and a rapidly widening global protection gap are placing unprecedented strain on the traditional insurance model, heightening calls for insurers to shift toward measures that prevent risk rather than solely pay for damages after disasters strike.
This warning was issued by Brad Irick, managing executive officer and co-head of international business at Tokio Marine, who cautioned that intensifying natural catastrophes are eroding the sustainability of insurance cover for households and businesses worldwide.
Irick, in a recent article published by the World Economic Forum (WEF), explained that the long-standing approach of collecting premiums and settling claims can no longer keep pace with rising costs fuelled by increasingly volatile weather events.
According to him, “For the fifth consecutive year, global insured losses from natural catastrophes exceeded $100 billion in 2024. Yet, insurance covers merely 30 percent of total economic losses from natural disasters.The remaining 70 percent, known as the protection gap, falls upon governments, businesses and individuals ill-equipped to absorb these costs.”
Losses linked to secondary perils such as flooding, wildfires and severe storms now account for around 60 percent of catastrophe-related damage, yet conventional pricing models still struggle to incorporate their volatility. As premiums rise to reflect worsening risks, Irick explained that coverage has continued to shrink, particularly among vulnerable households. Between 2013 and 2022, a 1 percent rise in premiums reduced insurance uptake by 0.107 percent, he said.
The economic consequences are already apparent in urban regions where businesses are opting to relocate rather than absorb mounting insurance costs. This triggers a chain reaction that weakens city economies: property collateral values drop, tax revenues decline and under-insurance leaves recovery efforts severely underfunded. “If the level of insurance is not sufficient to pay for recovery, some insurance becomes as effective as none,” Irick cautioned.
Irick pointed to Broward County, Florida, as an example of how proactive resilience investments can reverse this negative cycle. Faced with recurrent flooding and a 400 percent increase in insurance pricing, local authorities and the private sector collaborated to identify and finance adaptation measures, including advanced drainage systems and protective seawalls. Independent consultants evaluated the economic impact of these upgrades and, in one instance, recorded a return on investment exceeding 9 percent, helping to build stakeholder confidence and support for new local taxes to fund the infrastructure.
Cape Town in South Africa also showcases the economic power of resilience planning. The city partnered with the Resilient Cities Network in 2016 and developed an integrated management structure capable of monitoring more than 2,000 infrastructure initiatives in real time. Improved operational efficiency contributed to a 97 percent revenue collection rate, one of the highest globally reassuring lenders of the city’s debt-repayment capacity. This track record enabled Cape Town to secure expanded financing, culminating in a credit rating upgrade from Moody’s in May 2025, despite increased borrowings to strengthen infrastructure resilience.
These successes reflect what the Resilient Cities Network describes as a “city resilience portfolio approach.” The model encourages authorities to treat climate adaptation not as isolated projects but as interconnected investments that enhance future creditworthiness, strengthen economic competitiveness and attract diverse capital sources.
