Zimbabwe’s life insurance market projected double digit growth in next five years

Zimbabwe’s life insurance market projected double digit growth in next five years

Insurance24 reporter

HARARE, Growth of the Zimbabwean life insurance market is expected in double-digit figures over the next five years from 2017 with low inflation supporting real term increases although this will be from a low base and is vulnerable to economic shocks.

According to a summary Zimbabwe Insurance Report by research company BMI, the life segment will remain dominated by employee benefits/group life products.

In 2017, the market will grow 11.6% and with inflation at 4.5%, the rate of real growth will be in positive territory.

“However, there are high levels of political risk and a liquidity crisis that will impact on household spending. The trajectory of this recovery is somewhat dependent on the outcome of President Robert Mugabe’s likely succession, which remains a highly uncertain issue,” the report said.

BMI said Zimbabwe’s non-life sector is currently seeing more impressive growth, mainly because the motor insurance market has seen a move against fake insurance certificates.

However, it is the smaller personal accident insurance line that will lead growth in this segment, if only because of sluggish growth in new car sales and real estate.

In 2017, gross non-life premiums will grow at an annual rate of 9.1%, revised up from 6.2% since the previous quarter, and reach $252mln, equating to per capita premiums of $14.50 and giving a penetration rate of 1.7% (premiums against GDP).

The report says pressure on prices will likely remain in a downwards direction and most lines should benefit from significant volume growth.

As a result of floods that caused damage to crops, property and vehicles with motor insurance claims rising 40% in March 2017 due to deterioration in road quality, net loss ratios could rise to over 50% in 2017.

BMI added that Non-life density (premiums per capita) is well below $20 and will remain so by the end of the forecast period.

“Constraints such as low household incomes and a difficult business environment are likely to prevail over the coming five years. However, non-life premiums will lag behind the life segment, as consumer growth remains constrained in spite of the economic recovery.”

The report said foreign investment in the Zimbabwean insurance market would most likely come through acquisition of local insurance firms, but the country’s economic woes and adverse regulatory system will limit interest.

It said the capital requirements of $2mln for non-life, $1.5mn for life insurance and $5mn for reinsurers are relatively high in such a small market and have proven to be a major disincentive.


Headline Insurance Forecasts (Zimbabwe 2014-2021)

2014   2015   2016e   2017f   2018f   2019f   2020f   2021f

Gross life premiums written, USD, % y-o-y              14.4    10.8     4.  1        11.6     15.6      15.5       11.5       10.3

Gross non-life premiums written, USD, % y-o-y     2.4     -0.1       7.6         9.1       8.3        8.3        7.3         7.3

Gross life premiums written, USDbn                        0.30  0.33      0.35       0.39    0.45      0.51      0.57     0.63

Gross non-life premiums written, USDbn                0.21   0.21      0.23       0.25    0.27       0.30    0.32     0.34

e/f =  BMI estimate/forecast. Source: BMI, IPEC