In the ever-evolving landscape of African investments, the need for effective risk management has become paramount. Mikir Shah, the Founder and Chief Executive Officer of Africa Specialty Risks (ASR), with over 25 years of experience in Africa’s financial sector shares insights into the challenges investors face, the role of insurers, and the strategies reshaping the African insurance markets. ASR’s mission is to de-risk investments into and across Africa, providing insurance and reinsurance products that support investors, businesses, and entrepreneurs in expanding their activities across the continent.
What is the mission of Africa Specialty Risks?
The mission of Africa Specialty Risks (ASR) is to de-risk investments into and across Africa. ASR provides insurance and re-insurance products to support investors, businesses and entrepreneurs in expanding their activities across the continent. ASR’s comprehensive corporate and specialty (re)insurance coverage starts from the initial investment phase such as political risk insurance and trade credit and extends to construction, political violence and terrorism to other operational risks such as property, energy, liability, parametric, Kidnap and Ransom and Parametric.
What risks are causing investors to be apprehensive when investing in Africa?
Investors in Africa may face apprehension due to risks such as environmental and governance concerns, sovereign debt defaults, political violence, terrorism, and policy changes following government leadership changes. These risks, both perceived and real, can influence investment decisions across the continent. To mitigate these risks, involving insurers early on is crucial. ASR, with its large team of experts, specialises in political risk insurance and trade credit covers, and is available to discuss these concerns with investors investing into and across the African continent from the outset.
What key challenges do insurers face in Africa when it comes to underwriting and pricing risk?
The key challenge for the insurance market is trying to stay ahead of climate change. Storms are getting stronger and flood events are more extreme. Assessing the return periods associated with natural catastrophe is a complex task even when climate is static and becomes significantly harder as global temperatures rise. Fortunately, data quality and modelling techniques continue to improve which provides some mitigation.
What new risk management strategies are being implemented in African insurance markets?
Clients and Insurers are retaining additional risk, and this will have positive impacts on risk management. Larger risks are being transferred to the re-insurance and financial markets. This can be through tried and tested products like Facultative and Treaty reinsurance. In addition, ASR offers Parametric solutions to provide innovative risk mitigation / transfer solutions and recently it led the Mozambique cyclone parametric placement, offering wind speed and rainfall cover in partnership with The Mozambique National Institute of Disaster Management, The World Bank, and PULA. ASR was the lead reinsurer for this innovative initiative providing the state insurer with a pay-out when specific trigger conditions are met, providing US$35 million of cover based on calculated thresholds. The program uses objective measurements to map economic loss and provide prompt funds for recovery, being the first African-specific cyclone cover.
What role does Mauritius IFC play in the strategy of Africa Speciality Risks?
Mauritius plays a central role in Africa Speciality Risks’ strategy, serving as a hub for the company’s operations across many African countries. The bilingual and well-educated population in Mauritius is an asset to the company, and the established insurer presence in the country makes it a prime location for becoming the reinsurance hub for Africa. ASR aims to address the lack of adequate reinsurance capacity across Africa by providing specialist risk mitigation products from the continent itself, something that has been difficult for businesses and investors to access. The Mauritian government and FSC have been supportive in allowing ASR to establish a full suite of services on the ground, and ASR expects to grow its team further in the future. ASR’s presence in Mauritius supports the government’s aim to become the preferred route for investment activities into Africa, and ASR is committed to investing in and upskilling Mauritian employees to provide aspirational career prospects. This can contribute to making Mauritius a leading reinsurance hub in Africa and accessing previously untapped markets.