Continental Re sees huge growth as Africa’s construction booms

Africa’s Continental Re plans to double premium income from its property and engineering business to $80 million over the next five years, as it bets on the continent’s infrastructure boom, its executive director said.

Insurance companies are pushing for growth in Africa where many people are uninsured, banking on growing premiums as the continent develops its infrastructure and a consumer class demanding protection from risk.

The property and engineering business contributed 44 percent of Continental Re’s total revenue, but Executive Director Lawrence Nazare expected it to grow to 50 percent in five years.

“We are seeing growth across all our business lines. The opportunity primarily is in … construction projects we are seeing on the continent,” Nazare told Reuters.

Nigeria’s second-largest insurer opened a branch in South Africa on Thursday with the aim of doubling its reinsurance market share to 10 percent over the next five years, he said.

African construction projects were worth $325 billion last year, Nazare said citing a 2014 Deloitte report, up nearly 50 percent from the previous year as power, transport, oil and gas and construction sectors expanded.

Continental Reinsurance, which also operates in Cameroon, Ivory Coast, Kenya and Tunisia, would underwrite risk in these sectors and would also increase deal sizes, Nazare said.

“We are in the process of arranging deals that would allow us to provide at least $100 million in each of the deals we are involved in this year,” he said. Last year’s transactions were of about $20 million each.

Continental Re was expanding so fast it would need to raise extra capital within the next 12 months, Nazare said, without giving an indication of how much was needed.

Low insurance penetration is also attracting foreign players such as Anglo-South African Old Mutual, which paid nearly $100 million for a 23.3 percent stake in Kenyan insurer UAP Holdings.

Other South African and European insurers such as Switzerland’s Swiss Re and France’s AXA have made similar ventures.