The potential exit of Niger, Mali, and Burkina Faso from the Economic Community of West African States (ECOWAS) marks a new chapter of political unrest in the region but is expected to minimally impact the re/insurance markets of these countries, AM Best says.
ECOWAS, established in 1975, is among eight regional economic communities acknowledged by the African Union to promote regional integration across the continent. Its primary goal is to establish a unified, expansive trading bloc through economic collaboration.
Since its inception, ECOWAS, along with its counterpart, the West African Economic and Monetary Union (UEMOA), has introduced several policies to enhance trade among West African nations and their connection to the global market.
Although the withdrawal seems to be politically motivated, the economic ramifications could be significant. Historically, border closures between the Sahelian nations and coastal states have severely disrupted the regional economy and impacted the livelihoods of countless farmers, herders, and urban residents who rely heavily on regional commerce.
AM Best analysts revealed in a commentary titled “Impact on (Re)Insurance Markets Likely Limited Amid Heightened Political Tension in West Africa,” that insurance penetration in Niger, Mali, and Burkina Faso remains modest.
Nonetheless, there is strong demand for reinsurance for substantial commercial risks, including retrocession to international markets. It is anticipated that commercial ties between local insurers and regional reinsurers will continue despite the political changes.
However, withdrawing from the Conférence Interafricaine des Marchés d’Assurances (CIMA) could lead to regulatory changes for the re/insurance sectors in these countries. AM Best analysts are set to keep a close watch on how these developments unfold.
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