The withdrawal of Niger, Mali, and Burkina Faso from the Economic Community of West African States (ECOWAS) and the formation of their own trading bloc, l’Alliance des États du Sahel, introduces potential uncertainty but is expected to have limited short- to medium-term consequences for re/insurance companies operating in the region, according to AM Best.
ECOWAS has said that it will keep the door open for dialogue with the three nations for six months. In the meantime, the regional body has confirmed that the movement of goods and services from these countries will continue under its Trade Liberalization Scheme and Investment Policy
The insurance markets in Niger, Mali, and Burkina Faso remain relatively small, with AM Best noting that it does not anticipate significant changes in demand, particularly in personal lines.
However, large commercial risks will continue to require reinsurance, which is typically managed through mandated cessions to national and regional carriers and retroceded to international markets. These mechanisms are expected to remain in place despite the political changes.
Despite the challenges, the reinsurance sector in West Africa has experienced notable growth and transformation in recent years, driven by regional economic developments and the strategic initiatives of key industry players.
Notably, the leading pan-African reinsurer, Africa Re, reported a gross written premium of US$1.106 billion in 2023, surpassing the US$1 billion milestone for the first time. The company also achieved a net income of US$129.145 million in the same year.
Niger, Mali, and Burkina Faso continue to be members of the Conférence Interafricaine des Marchés d’Assurances (CIMA), which has regulated insurance markets in sub-Saharan Africa since 1992. While there has been no indication of a withdrawal from CIMA, any changes to their participation could introduce regulatory uncertainty for re/insurers operating in these markets.
The relationships between local and regional insurers are primarily commercial rather than solely dictated by regulation. Domestic insurers are expected to maintain business ties with regional reinsurers, ensuring stability in risk-sharing despite geopolitical developments.
A departure from ECOWAS raises questions about future engagement with CIMA. AM Best does not expect immediate exits from the regulatory bloc, but if any of the three nations were to withdraw, their insurers would need to navigate a new regulatory framework.
While African reinsurers have experienced capital growth, capacity constraints remain, requiring continued support from global reinsurers for major commercial risks. Industrial and infrastructure projects in Niger, Mali, and Burkina Faso still rely on international reinsurance backing. Local retention rates remain low, with commercial insurers expected to continue ceding risks to both regional and global markets.
Despite overall market growth, Africa-based reinsurers lack sufficient capacity to meet the insurance needs of their primary markets fully. Many rely on retrocession to provide additional capacity, particularly for property and energy risks. Additionally, local insurers often depend on international reinsurers for expertise in underwriting complex risks.
Insurers within CIMA are subject to restrictions on the percentage of business they can cede to reinsurers outside the regulatory bloc. Locally licensed insurers must cede a portion of their direct premiums to the regional reinsurer, Compagnie Commune de Réassurance des Etats membres de la CIMA (CICA-RE). Other compulsory cessions exist, including those to CICA-RE, the Africa Reinsurance Corporation (Africa Re), and state reinsurers in certain member states.
So far, Niger, Mali, and Burkina Faso have not signaled any intent to change their involvement with CIMA. A potential exit would have regulatory implications, as CIMA oversees insurance regulations for its members.
The long-term effects of these developments remain uncertain, particularly if discussions around a separate monetary union or regulatory framework gain momentum. AM Best notes that re/insurers with strong market knowledge and risk assessment frameworks are positioned to navigate potential changes and emerging opportunities.
From a ratings perspective, AM Best currently views the impact of these developments as limited but will continue to monitor the situation closely.
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