The challenges of the Mozambican insurance sector

Following uninterrupted GDP growth since 2010, Mozambique’s economy began to show signs of a slowdown in 2015.

The challenges of the Mozambican insurance sector

Foreign investment dwindled – largelybecause of an unacknowledged public debt totaling 1.4 billion USD – the currency(metical) has depreciated, inflation has risen and the Government, corporationsand families have little purchasing power.

This unrecognized public debt has turnedMozambique into Africa’s most heavilyindebted country.

The IMF describes Mozambique as a countryin debt distress and rating agencies place it in the restricted defaultcategory.

Mozambique now needs to pay off its publicdebt. With the economy in recession, restrictive budgetary policies are vital.The Poverty Index in Mozambique is admittedly difficult to improve and it isequally difficult to increase the spending power of a beleaguered middle class.

The Mozambican economy is lightly industrializedand relies mostly on mining and agriculture. Its potential for energyproduction and tourism has yet to be explored. The entrepreneurial community ofMozambique primarily


The challenges of the Mozambican insurancesector comprises microbusinesses that do not produce or trade enough to generate meaningfuladded value.

Despite the economic environment, datafrom the ISSM – Instituto de Supervisão de Seguros de Moçambique (InsuranceSupervisory Board of Mozambique) shows that, in contrast to the GDP decrease,the insurance market grew 13.3% in 2016, a 3.2% increase on 2015. Nonlife insurance is the main contributor to this growth.

In 1991 there was only one insurer in Mozambique,so the insurance sector in the country had far from achieved maturity. However,since then, the number of insurers has grown; the market now boasts 19insurance companies (11 nonlife,

four life, four mixed), and a microinsurance business.

Despite the increasing number of operatorsin Mozambique, four insurance companies account for 80% of premium income.

The purchase of insurance products, normallymeasured by per capita premiums, is linked to economic growth and thepopulation’s living standards and support they receive, as measured by theHuman Development Index.

Although the per capita premium ratio islow, there is a desire for lowerincome citizens – the most economically and socially vulnerable – toaccess insurance products and so mitigate the poverty spiral caused by adverseevents.

In order to develop the insurance marketin Mozambique, there is a need to extend the consumer base of companies andindividuals; those with the financial means and literacy skills to purchaseinsurance products.

There is also much to be done to ensuregreater product diversity and universal access to insurance. This explains whythe supply and demand of life and noncompulsory property insurance is limited. The penetration rate, measuredby the ratio of gross premiums issued to GDP, hovered around 1.5% on 31 December2016, reflecting the low ratio of per capita premiums.

Nonlife and life represented close to 83% and 17%,respectively, of insurance sector productivity on 31 December 2016.



ISSM Annual Report

The main property lines are auto, fire and natural hazards,injury/casualty and workplace accidents.

On the life side it’s mainly temporary, wholelife and income products. Due to the socioeconomic issues mentionedabove, investment vehicles have yet to develop.

In addition, brokerage has gained ground in the market, responsible for about46% of the sector’s output.

One of the main challenges in Mozambican society is improving financialand insurance literacy. This would help the more vulnerable people in society becomebetter informed about the benefits of property, health and life insurance andhow their purchase could prevent them from falling into a poverty spiral. It isin this context that microinsurance has been discussed in

Mozambique and for two years now, the ISSM has advocated for microinsurance by setting caps for insured capital. This enables citizenswith lower incomes and smaller entrepreneurs, particularly those in agricultureand livestock rearing, to engage with the market.

Another challenge is the insurance sector’s sustainability and the riskof insolvency for a number of insurers – currently the object of ISSMintervention.

A smaller number of market players would help increase profitability andsolvency for the remaining operators so in the medium term, we should expectfuture moves to consolidate this sector further.

Finally, as the banking and digital sectors become increasingly dominantin the future, insurance companies will have to meet the challenge ofdiversifying their distribution networks.


By PwC


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