President Paul Kagame has challenged African insurance sector players to be more innovative to increase penetration and profitability levels.
President Kagame was speaking at the 42nd general assembly of the Federation of African National Insurance Companies that opened in Kigali on Monday.
Kagame noted that despite Africans making up a significant percentage of the global population, Africa's insurance firms continue to generate significantly less revenues compared to the rest of the world.
The low levels of penetration are also unevenly distributed across the continent.
"One out of every six people on the planet is an African, nearly 17 per cent of the population. Yet Africa generates only 1.5 per cent of global insurance contracts, around $75 billion, as of a few years ago.
"Around three-quarters of that comes from South Africa. The rest of the continent combined accounts for less than one-half of one per cent of the world market. I think this has to change and you are the ones to change it," the President said.
As a result of the status quo, the annual revenue of the entire African insurance market is less than that of individual top 15 firms globally.
"The annual revenue of each of the top fifteen international insurance conglomerates has generally exceeded the total value of Africa's insurance market. As a result, insurance penetration in Africa, as a percentage of gross domestic product, is several times lower than in other emerging and developed economies," Kagame added.
The President also observed that the sector has been somewhat slow to adopt innovations compared to other financial sector players such as banks and capital markets.
"Banks and capital markets everywhere, including in Africa, have moved quickly to integrate new technologies. This has greatly expanded access to financial services, especially in the informal sector. But insurance has been slower to adopt these innovations and it is important to catch up," Kagame added.
President Kagame, however, said that all was not lost and the sector still has a chance and opportunity to grow.
Among the potential drivers of the sector, he said, include the growing middle class which was expanding more rapidly compared to anywhere else in the world.
He also called on them to consider working relationships with players from across the world but cautioned them against taking a subordinate role.
"Africa's national insurance companies will be the drivers of that expansion as well as the natural partners for international firms looking to enter our market. We should work closely with others, but that does not mean African insurers should take a subordinate role," he said.
The sector's growth will also be facilitated by the continued efforts to eliminate barriers to trade through the planned signing of the Continental Free Trade Area agreement.
The agreement is set to be signed in Kigali next month.
"This is a historic pact, which has been nearly 40 years in the making and it represents a major advance for African integration and unity. Part of the Continental Free Trade Area is a Protocol on Trade in Services, and that includes the insurance sector," Kagame said.
The progressive liberalisation created by the agreement, he said, will open up new opportunities for African firms to compete and cooperate across borders, and build continental reach.
Kagame underpinned the importance of the insurance sector saying it does more than compensate for misfortune.
The sector's significance he noted, includes mobilising savings towards domestic investments as well as helping countries detect hidden danger and plan accordingly.
"The more advanced an economy, the greater the size, diversity, and efficiency of its insurance market. Indeed, it is fair to say that insurance underpins prosperity and innovation," he said.
The Federation of African National Insurance Companies president, Adamo Ndiaye, said that African insurance firms have to mull sustainability approaches to avoid stagnation or being rendered irrelevant.
He, however, noted that as the sector seeks to save itself, it should also aim at alleviating poverty and contributing to continental growth and development.