Côte d’Ivoire: Strength in numbers
In spite of a turbulent couple of years for the country as a whole, Côte d’Ivoire’s insurance sector has posted comparatively steady numbers over the past 24 months, although competition has been fierce. The market has also been facing downward pressure on revenue from premiums due to Article-13 CIMA reform (Inter-African Insurance Markets Conference) compelling policyholders to pay the entirety of their premiums up front in order to be insured, which has been challenging for the auto-insurance segment.
Granted that revenue in the life and non-life sectors dropped to CFA185bn (€282.03m) in 2011 from CFA193bn (€294.23m) in 2010, in light of the electoral crisis that paralysed the economy through the first four months of the year, although it is impressive it did not drop further.
In fact, despite the upheaval brought about by the last presidential elections, the Ivorian insurance market has grown by an average of 40% annually over the past five years, largely due to banking partnerships, new car sales and fiscal policies. These strong results also reflect significant room for yet more growth in the sector, as the penetration rate of insurance products among the population stands at 1%. Reduced taxes on health insurance since 2006, measures regarding transport insurance and fiscal incentives on retirement indemnities for life contracts since 2005 have had a positive effect on the sector.
The market is currently shared by 32 insurers and mostly consists of Ivorian and African capital, although European firms Allianz (Germany) and Axa (France) have around 13% and 4% overall market share, respectively, according to local publication PME Magazine. There is a high concentration of revenues among the sector’s large players, with around 60% of turnover captured by four insurers: Colina, NSIA (New Inter-African Insurance Company), Allianz and UA-Vie (Insurance Union of Côte d’Ivoire-Life).
As a result, the sector is full of small players, with 21 companies reporting yearly revenue of under CFA6.55bn (€10m) in 2011, 15 of which generated CFA3.28bn (€5m) or less, PME Magazine reported. This market fragmentation has been exerting downward pressure on margins as companies compete to attract and retain clients, while the smallest companies, particularly in the life segment, struggle to cope with high fixed operating costs.
To bolster sales, insurance companies have been joining forces with the banking sector to capitalise on the latter’s distribution network and higher penetration rate. The success of these initiatives has been all the more striking, given the well-developed presence of other distribution channels, with around 100 brokers, agents and micro-finance institutions in the country.
NSIA set the trend in 2006 when it acquired BIAO, one of the country’s largest banks, and now also has partnerships with Ecobank and the Ivorian Bank Company (Société Ivoirienne de Banque, SIB). Both insurers and banks have been taking on multiple partners to the benefit of all parties involved. Almany Timité, director-general of UA-Vie, told OBG, “We have doubled our turnover from CFA11bn (€16.77m) in 2007 to CFA22bn (€33.54m) in 2012, largely thanks to an increased focus on banking insurance in partnerships with pan-African banks.”
In a positive development that could stem premiums exports to reinsurers abroad, insurers in Côte d’Ivoire are set to benefit from greater local reinsurance capacity. Continental Reinsurance, a leading Nigerian reinsurer, is slated to open its offices in Abidjan, marking its first foray into the West African Economic and Monetary Union (UEMOA) and making it the second reinsurer in the Ivorian market, along with UEMOA regional insurer CICA-Re.
Beyond distribution channels, in-country premiums retention and fiscal incentives, the future of insurance in Côte d’Ivoire depends on political stability and security. In a market where more than one-third of non-life revenues come from auto insurance, which is mandatory, it is no coincidence that the 4.1% drop in sector revenue in 2011 coincided with that year’s economic contraction and a corresponding dip in new car sales. In the meantime, the insurance sector is sure to grow steadily as penetration increases and new products are introduced; the question, rather, is just how strong that growth will turn out to be.