Ghana Insurance Country Overview
2013
Table of Contents 1. Macroeconomic Picture ................................................................................................... 3 2. Insurance Market in Ghana .............................................................................................. 4 2.1 Ghana Insurance Penetration Trend ................................................................................................ 4 2.2 Ghana Insurance Market - 2011 ...................................................................................................... 4 2.3 Non-Life Insurance by Segment in Ghana........................................................................................ 5
3. Global Insurance Outlook ................................................................................................. 6 4. Competitive Scenario - Ghanaian Market ......................................................................... 8 5. References ....................................................................................................................... 9
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1. Macroeconomic Picture
Source: IMF
Ghana’s GDP growth for 2012 was at around 7%, driven by oil revenues, the services sector and the strong export performance of cocoa and gold. Gross domestic product (GDP) growth decelerated from 14.4% in 2011 to 7% in 2012. Ghana began producing oil in commercial quantities in late-2010 which is the main reason for the peak growth in 2011. In spite of the oil sector’s boost to industrial growth, it has had negative impacts on agriculture and manufacturing in Ghana. Centre for Policy Analysis , Ghana states that the impact of oil discovery was evidenced in the continued steady appreciation of the real effective exchange rate which has resulted in steady erosion of international price competitiveness of the tradable subsectors of the non-oil sector. The services sector is the sector that seems to be doing well largely also due to the oil sector – such as accommodation, recreation, entertainment, household services and so on in support of the oil sector. In 2010, Ghana enacted a legal framework for sound management of its oil wealth, and thus far its programme of hedging oil imports and exports has succeeded in maintaining macroeconomic stability. The anticipated boost in revenue from oil has raised expectations of increased fiscal space, as well as of higher economic growth and improved living standards. Ghana’s medium-term outlook remains healthy, with projected GDP growth of 6.9% in 2013 and 6.8% in 2014. Investments in the oil and gas sectors, public infrastructure and commercial agriculture are expected to drive this growth.
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2. Insurance Market in Ghana 2.1 Ghana Insurance Penetration Trend
In spite of the positive growth, insurance penetration in the country is still very low. Insurance penetration which is defined as the contribution of total insurance premiums to GDP is still around 1 %. This can be compared to South Africa14.8%, Namibia 7.3%, Kenya 2.8%, Ghana 0.6% and Malaysia 4.8%. The National Insurance Commission of Ghana has therefore actually supported the development of Microinsurance products for the informal sector with the hope that this will increase the insurance penetration in the country. Regulations for Microinsurance are part of the draft Insurance Bill which will in future be passed by Parliament.
2.2 Ghana Insurance Market - 2011
The Ghanaian insurance industry recorded Gross Premium Income of USD403 Mn in 2011 representing a growth of 37.2% over the previous year. Non-Life segment dominates the industry with around 57% share. “As practitioners, we are very optimistic about the future of our industry given the positive socioeconomic developments in our country. There are bound to be new challenges and greater demands on us as insurance practitioners� President - Ghana Insurers Association (GIA)
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2.3 Non-Life Insurance by Segment in Ghana Gross Premium Trend (USD Mn)
Non-Life Segmental Break up (USD Mn)
Gross Written Premium for both life and non-life segment have been on a positive growth since 2010 which is very encouraging. Non-life sector dominates the industry. Gross premiums for non-life rose from USD130 Mn in 2007 to USD230 Mn in 2011. The rate of growth has been in the double digit with 23% in 2010 and 2011. Ghana’s oil find and effective implementation of the compulsory insurance of buildings have contributed to this positive trend. Non-Life segment Ghana is dominated by motor insurance (45% of GWP in 2011), driven by mandatory 3rd party liability cover and more recently the noted increase in the number of vehicles. All sub segments of Non-Life have registered strong growth in gross written premiums over the last five years with the majority of this growth coming from fire and marine classes. This was supported by commercial oil production and also aided by compulsory insurance cover for commercial properties and buildings under construction. Increasing number of motor vehicles and increased extension of personal motor credit by banks have puhsed the premium growth in the traditional motor segement. Intermediaries dominates the Ghana’s insurance distribution channel and have negative impact on the sector’s operating profitability and stability. However insurers have started looking for alternative chanles in the form of agents and bancassurance to be more competitive and profitable.
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3. Global Insurance Outlook The highest levels of growth in primary insurance business continue to come from emerging markets. There is still plenty of catch-up potential, although in some countries growth rates have now reached their peak or are falling slightly. Real growth in P&C insurance premiums – 2012-2014 (%)
In P&C business, it is expected that real premium growth in Africa and Middle East would be of about 3.6% and 4.7% in 2013/14. In many parts of Asia, such as China and India, real growth rates could be as high as 10% or more. Real growth in Life primary insurance premiums – 2012-2014 (%)
In life insurance, it is expected that 2013/14 may bring even higher levels of real premium growth in emerging markets – in many Asian and Latin American countries considerably more than 10%, and over 15% in some cases. In Africa and Middle East, the growth of 8.2% seen in 2012 is now forecast to return to the level of 4-5% in 2013. Global ranking of regions according to real growth in primary insurance premiums until 2020 (%) 6
The long-term prospects for the insurance markets – between now and 2020 – are of course subject to much more uncertainty than the short-term forecasts. Important drivers of expected insurance market development – in both life and non-life business – are economic factors such as economic growth, an increase in incomes, and inflation. These factors are expected to provide a stimulus to the insurance industry, primarily in emerging markets. Growth in the life insurance and P&C segments will continue to be significantly more dynamic in emerging markets than in industrialised countries up to 2020. Emerging countries in Sub-Saharan Africa could see annual real growth rates of around 5%, both in P&C and Life.
Worldwide growth in primary insurance remaining higher than GDP growth, with reinsurance growing more slowly
Regional differences remain – emerging markets are growing strongly, North America is on the path to recovery, but progress in Europe is very slow
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4. Competitive Scenario - Ghanaian Market Leading Insurance Providers
Top 10 Life Insurers- 2011 Market Share
Top 10 Non-Life Insurers- 2011 Market Share
As at January 2013, the insurance industry was made up of 25 Non-Life companies, 18 Life companies, 2 Reinsurance companies and 54 Broking companies. Ghana’s Life insurance sector is more consolidated than Non-Life with top 10 players having around 95% share of the market. The number of participants in the Ghanaian Non-Life market increased gradually from 16 in 2007 to 25 in 2011. The entry barriers in terms of minimum capital requirements are low and most of the new entrants have been the foreign owned entities exploring opportunities in Ghana. Recently LeapFrog Investments today announced the largest private foreign investment in the history of Ghana’s insurance industry by investing USD$5.5 million in Express life and providing operational support across the organization. The increasing number of licensed insurance companies has resulted in increased competition among market participants; this has put pressure on premium rates and undercutting. The sharp increase in the number of companies has led to a fierce competition for growth and survival of the insurance industry.
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5. References African Development Bank Group National Insurance Commission (NIC), Ghana Centre for Policy Analysis, Ghana www.businesswire.com www.ghana.gov.gh Munich Re- Insurance Market Outlook
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