New actors to boost competition in Gabon and the sub-region

Despite the high level of competition in Gabon’s insurance market, strong margins and steady growth in the last five years continue to attract new players. Most recently, Wafa Assurance, Morocco’s main insurance provider by market share, signalled in March 2014 that it plans to launch operations in Gabon and three other countries in the Central Africa region.

For a market that has largely developed on the back of the extraction of natural resources, Gabon’s insurance sector has proven its capacity to expand in recent years, which could create room for a ninth insurer. At the same time, a growing trend of internationalisation provides opportunities for Gabonese insurers to expand beyond the domestic market.

Economies of Scale

A number of insurers are working to expand their presence in the Inter-African Conference on Insurance Markets (Conférence Interafricaine des Marchés d’Assurances, CIMA), which covers 14 countries in West and Central Africa. The top three CIMA markets, Côte d’Ivoire, Cameroon and Gabon, all issued over CFA110bn (€165m) in premiums in 2013. However, the majority of the region is made up of smaller markets; eight of the 14 countries issued less than CFA45bn (€67.5m) in premiums in 2013. As a result, companies are working to extend themselves across West and Central Africa to reach an economy of scale that will maximise their returns.

Foreign and multinational groups have been a critical and driving force in the development of the country’s insurance sector. Only two Gabonese insurers, Ogar and Assurances Industrielles et Commerciales (Assinco), were established locally; the rest entered the market as part of pan-African networks. Axa Gabon, the oldest insurer in the Gabonese market, is present in four markets in the region. UAG Vie began operation as Axa Gabon’s local life subsidiary, but in 2004 it was sold to the Senegal-based SUNU Group, whose network is present in 11 CIMA countries. Colina Assurance Gabon and Nouvelle Société Interafricaine d’ Assurances du Gabon both launched operations as part of pan-African networks of the same name, and each is present in 12 CIMA markets.

Market Stability

Gabon’s insurance sector is highly competitive, as eight operators vie for their share of a market and generated premiums of CFA112.37bn (€168.55m) in 2013. Price competition has put pressure on insurers’ margins in recent years, but the sector continues to expand in both life and non-life lines. Premiums grew by nearly 13% in 2013, a notable increase from growth of 7.5% in 2011 and 10.4% in 2012. Industrial and automotive premiums remain steady, but after three years of rapid expansion in life, health and other personal insurance lines, there was some concern in 2012 that new premium underwriting would slow as the existing client base became saturated.

The market faces several operational and socio-economic obstacles, particularly with regard to personal lines. Although Gabon has one of the highest per capita income levels in the region, significant income disparity places insurance products out of reach for much of the population. In addition, low awareness and historically slow claims payment have undermined consumers’ confidence in insurance products. However, steady GDP growth and a concerted effort among insurers to respect payment delays are having an impact, and the market has shown its ability to expand as the appetite for insurance products grows.

Low penetration levels for products ranging from home and construction to general liability insurance offer a number of new avenues for growth. Personal lines, particularly in life, credit, funeral and luxury asset insurance, remain relatively untapped. Insurers have taken a more proactive stance in the last two years, working to communicate directly with potential customers and increase their exposure by opening more agencies in urban areas. These efforts are beginning to show results, including growth of 22.55% in life insurance premiums in 2013. In the non-life sector, lines such as health, general liability and various casualty insurance all expanded by more than 15% year-on-year.

New Entrants

In 2013 the fourth-largest Gabonese insurer by market share, Assinco, and its banking partner, BGFIB ank, announced that they planned to create a dedicated life insurance subsidiary, Assinco Vie. BGFIB ank acquired a 60% stake in Assinco in October 2011 as part of the bank’s expansion plan and in line with rising bancassurance sales. An operating structure was drawn up and the company’s start-up capital raised. However, its entrance onto the market proved complicated and, following an unsuccessful attempt to merge Assinco Vie with an existing life insurance company, the project was abandoned.

Wafa Assurance now plans to become Gabon’s ninth insurer. The firm announced in March 2014 that it will expand into four Central Africa markets: Gabon, Cameroon, Côte d’Ivoire and the Republic of the Congo. Wafa Assurance originally planned to enter the CIMA region by acquiring a stake in existing insurers.

However, according to company statements, it now plans to establish local subsidiaries in each country, following its success in Tunisia. The company’s Tunisian life insurance subsidiary generated turnover of Dh89.6m (€7.95m) and carved out a 7% market share in its first seven months of operation in 2013, largely due to reliance on the Tunisian Attijari Bank network, and the company hopes to replicate this model in Central Africa.

The insurance company is wholly owned by Attijariwafa Bank, Morocco’s largest bank by market share, which is present in 10 African countries, including Gabon, where in 2009 it acquired a 59% stake in l’ Union Gabonaise de Banque. The insurer will rely on an existing network of banking partners to facilitate its entrance into local insurance markets and provide it with a pool of bancassurance clients.

In doing so, the company is planning to further increase the size of the local insurance market rather than further dividing an already competitive sector, according to recent statements.

Moroccan Influence

Two other Moroccan insurance networks have made similar moves in the region. In 2010 the private Moroccan holding Saham Group acquired a majority stake in Colina, a pan-African insurance group based in Côte d’Ivoire.

With financial support from the International Financial Corporation, the group has worked to expand Colina’s sub-Saharan network, which was rebranded Saham Assurance in April 2014. Saham already owned the Moroccan insurance provider CNIA Saada, and the merger provided CNIA Saada with new avenues for expansion into the growing insurance markets of West and Central Africa. Saham executives indicated in 2010 that the group would also rely on partnerships with the existing Moroccan bank network to extend its reach throughout sub-Saharan Africa.

In addition, RMA Watanya, the second-largest insurer on the Moroccan market, announced in March 2014 that it had acquired a stake in four subsidiaries of the Ivoirian company Belife Insurance in Cameroon, Togo, and Côte d’Ivoire. According to local media, RMA Watanya acquired a 38% stake in Beneficial Life Insurance Cameroon and Beneficial General Insurance Cameroon for a total of CFA3.1bn (€4.65m). RMA Watanya is owned by the Moroccan holding FinanceCom, which also owns Morocco’s BMCE Bank, allowing the insurer to rely on BMCE’s banking network in Cameroon, Côte d’Ivoire and Togo.

Strength in Numbers

The regional expansion strategy has also taken hold among the three insurance providers founded in Gabon: Ogar, Assinco and the new national reinsurer, Société Commerciale Gabonaise de Réassurance (SCG-RE). Assinco, Gabon’s fourth-largest insurer by market share, is integrated into the pan-African Globus network via its shareholder, BGFIB ank. The network covers insurance companies in 32 countries, providing Assinco access to a broader network of operators and reinsurance partners. Ogar plans to be the first locally based insurer to expand into other countries in the region.

Renaud Allogho Akoue, Ogar’s secretary-general, told OBG, “In the coming years, Ogar aims to expand into three to four countries in Central and West Africa, with the goal of becoming a pan-African insurance network.” The insurer plans to pursue this strategy by acquiring stakes in existing regional operators in both the life and non-life segments.

SCG-RE also intends to expand its presence throughout the continent and ultimately aims to rival major African reinsurers such as Africa Re. In addition to mandatory cessions by local insurers, SCG-RE acts as a conventional reinsurer, with some foreign clients in the CIMA region and Maghreb. In 2013 5.58% of turnover came from voluntary cessions, half of which, or CFA195m (€292,500), came from foreign clients. SCG-RE intends to gradually raise its capital from CFA5bn (€7.5m) to CFA10bn (€15m) by opening up to both domestic and foreign companies, in an effort to benefit from foreign partners’ experience. The expansion of Gabon’s domestic insurance sector, combined with companies’ efforts to spread across a greater number of regional markets, should provide sufficient room for growth for Gabonese and foreign firms alike.