Here is the statement taken from a 2020 World Bank report on AfCFTA that holds the reason and purpose for the new collective vision the insurance sector in Africa needs to have. It says:
"The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures." Very instructive, one would say. Also, according to the Trade Law Centre, "The AfCFTA is different from a traditional free trade area (FTA), which only deals with trade in goods. The AfCFTA covers trade in goods and trade in services (negotiated in phase I) as well as investment, intellectual property rights (IPRs), and competition policy (to be negotiated in phase II)."
With respect to the insurance sector, while the responsibility to create, or recreate, and drive such collective vision wrest on the Africa Insurance Organization (AIO) and the Association of African Insurance Supervisory Authorities (AAISA), it is expected that we will begin to hear and see active conversations emerging from the engagements of various insurance stakeholders, now that AfCFTA has become operational.
Interestingly, these pivotal organizations are holding their annual conferences, sometime during the year and, irrespective of the theme, this historic commencement of AfCFTA will be discussed as the emergent signpost for the development and sustainability of insurance in Africa. "Negotiations on services began in June 2018, and countries have identified five priority sectors: financial services, transport, telecom/information technology, professional services, and tourism. The benefits of services liberalization extend far beyond the service sectors themselves; they affect all other economic activities in which services are inputs" according to the World Bank report.
To start with, the insurance industry urgently needs the opportunity that AfCFTA presents in some policy areas - Public Procurement, Labour Market Regulations, Environmental Laws, Intellectual Property Rights and State Trading Enterprises (STEs) that it offers comparative advantage over the subregional Preferential Trade Agreements (PTAs) namely: Common Market for East and South Africa (COMESA), East African Community (EAC), Economic Community of West African States (ECOWAS), South African Development Community (SADC), South African Customs Union (SACU), West African Economic and Monetary Union (WAEMU), and Economic and Monetary Community of Central Africa (CEMAC). It will become possible to reinforce what was happening between re/insurers and PTAs or initiate provisions of insurance services that were not previously available.
The conversation should not only have commenced since 2018 when 44 Countries signed the framework agreement at the African Union (AU) Summit in Kigali, Rwanda but the communication around it ought to have been unveiled in previous conferences of AIO and those of subregional bodies. Nonetheless, it is not too late to engage, exchange and earn from the operationalization of AfCFTA headquartered in Accra, Ghana, where the insurance industry is on a bounce.
Specifically, the insurance sector's renewed vision will connect well with poverty reduction, the primary priority of AfCFTA, but key focus of microinsurance, which is being developed across more African countries. With the projections that by 2035, AfCFTA will boost manufacturing and exports by double-digit percent, increase wages and lower gender wage gap as well as increase job opportunities especially with increased investment in technology, insurers and reinsurers in Africa cannot afford to watch these economic development efforts from the sidelines.
Push for Insurance Inclusion
Happily, Africans hold top executive positions in leading global insurance and reinsurance brands, some of which are keenly interested in the African market, evident in their equity and strategic interest in critical African financial institutions. The insurance sector can therefore push for the inclusion of insurance specifically in the unfolding agenda of AfCFTA as we have began to see in some countries that had committed very early to the agreement.
It is more imperative to lean on the Financial Inclusion Strategy, a global agenda that most countries have committed to with a view to strengthening their financial services industry, if we have to get insurance into AfCFTA. Besides, digitization is equally one of the factors that both the insurance sector and AfCFTA are looking at to record significant integration into the global financial ecosystem.
AfCFTA presents a unique opportunity to promote inclusion. For example, countries under ECOWAS operate the Brown Card Insurance Scheme which "ensures prompt and fair compensation to the victims of road accidents for the damages caused them by non residing motorists travelling from other ECOWAS member States to their country". Will insurance regulators and incumbents within the subregional PTAs seek to have such happen along the framework of AfCFTA in view of the expected increase in intra-continental movements of goods?
While African Trade Insurance Agency, a pan-African financial institution is well positioned to lead the provision of insurance services especially for trade credit and political risks, we expect other privately-owned transnational insurers like Allianz, AXA, Old Mutual and Sanlam, just to mention a few, to play very critical roles in making insurance work effectively with AfCFTA.
Making the Case for Nigeria
Nigeria as host of the AIO Conference 2021, which was postponed from 2020 due to the Coronavirus (COVID-19) pandemic, stands the best chance of driving the insurance sector agenda with AfCFTA; interestingly, it will also earn the position of AIO President due to be bestowed on its Vice President, Mr. Tope Smart, a Nigerian and Group Managing Director of NEM Insurance Plc as well as Immediate Past Chairman of Nigeria Insurance Association (NIA).
Experiences of the Nigerian insurance industry through the lockdown occasioned by COVID-19 and the violent protests of last October, which affected thousands of insured businesses amounting to claims payment of almost N10b (approx. US$25m) would surely be useful as considerations within the objectives of AfCFTA are discussed.
Additionally, with leading global brands operating in Africa having dominant presence in Nigeria, it is feasible for the National Insurance Commission (NAICOM) working with other members of the Association of African Insurance Supervisory Authorities (AAISA) to constitute a formidable team or think tank that would explore the possibility of repositioning the insurance sector by leveraging on AfCFTA.
Nigeria is already leading the continent in terms of capital base required of the re/insurers to operate and has an opportunity to establish its leadership in Agricinsurance, Bancassurance, Cyberinsurance, Digital Insurance, Energy Insurance, Health Insurance, Microinsurance, Takaful (Islamic Insurance) and Travel Insurance.
The year 2021 offers a greater opportunity for the insurance sector to utilize the crisis to win the hearts of Nigerians and African, and should not lose it. Will the Nigerian insurance industry take the lead?
Recent Insurance Report
Related to AfCFTA