AfDB approves USD10.4 million to strengthen African Reinsurance Company capital base
The Board of Directors of the African Development Bank Group (AfDB) through its private sector window approved an equity investment of up to USD10.4 million in Africa Re through the acquisition of newly issued shares via a rights issue. This increased capital is needed to strengthen the Company’s capital base and underwriting capacity required to support increasing demand for insurance products across the continent.
As the preeminent African reinsurer, Africa Re works to foster the development of the insurance and reinsurance industry, promote the growth of African underwriting capacity, support African economic development and reduce the outflow of foreign exchange from the continent through premium payments.
While the Bank’s previous investments in Africa Re have been a success, as confirmed by the strong business growth of Africa Re, the insurance and reinsurance sector remains underdeveloped and in need of significant amounts of capital to support African reinsurance companies attract business and reduce the outflow of foreign exchange to international reinsurers. There also remains significant additional scope for Africa Re to attract more profitable facultative business across the continent, to compete with multinational reinsurers and to pay lower retrocession costs as a result of the Bank’s intervention.
It is recognized that the insurance and reinsurance sectors :
- ncrease trade and investment by allowing entrepreneurs and businesses to better manage risk,
- Promote the deepening of the financial sector through facilitating increased asset backed lending and
- Create pools of long term local capital that can be used to drive the development process.
By strengthening regional reinsurers and by retaining more of the reinsurance premium in Africa, this transaction will contribute to macroeconomic stability on the continent and will bring about more private sector investment and growth across the continent.
As a shareholder, the Bank will use its representation on the Board of Directors to encourage and support Africa Re to adopt and spread international best practice on corporate governance, social, environmental and gender issues to insurance companies and the ultimate beneficiaries of reinsurance cover.
The Bank’s investment in Africa Re will complement its support to other regional institutions and consolidate the developmental gains from the activities of these institutions. In particular, it will support the activities of Trade and Development Bank (PTA Bank), Shelter-Afrique, Afreximbank, PTA Reinsurance Company (ZEP-RE) and the African Trade Insurance Agency (ATI). All these institutions are DFIs actively engaged, individually or in partnership with each other, in insurance/reinsurance related activities in support of economic growth and development in Africa.
This article was originally posted on Sustainable Development Africa Platform
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