Why Kenya is a Key Market for Africa Specialty Risks [interview]

Kenya's stable economy has been a source of attraction for numerous investors seeking to enter the East African market.

A conducive business environment and an available market have also played a key role.

An increase in the number of businesses and organizations has created demand for insurance services, leading to a growth in the number of re-insurance firms to insure big firms.

One of them is Africa Specialty Risks (ASR), a pan-African (re)insurance company focused on providing comprehensive, bespoke risk mitigation solutions to the African corporate and specialty markets.

Capital Business sat down with its Head of Political Risk and Trade Credit, Genevieve Ahinful, and this is what she had to say.

Could you introduce Africa Specialty Risks and shed light on its focus on Africa

Africa Specialty Risks (ASR) is a leading pan-African (re)insurance company focused on providing comprehensive, bespoke risk mitigation solutions to the African Corporate and Specialty market.

ASR was established in 2020 by Mikir Shah former CEO of AXA Africa Specialty Risks in partnership with Helios Investment Partners Fund IV, whose underlying investors include British International Investment plc (the UK's development finance institution), and the International Finance Corporation (a member of the World Bank Group).

ASR's business lines includes, Construction, Political Violence and Terrorism, Political Risk Insurance and Trade Credit, Property, Energy, Liability, Parametric, Kidnap and Ransom (K&R), and Security Risks.

With offices in the United Kingdom and Mauritius, as well as a presence in Kenya, our aim is to expand further by establishing hubs in other African countries, notably Nigeria, Morocco, South Africa, and Côte d'Ivoire.

Africa offers immense investment opportunities, and ASR believes it plays a crucial role in unlocking this potential by providing the right insurance coverage for risk mitigation from the initial investment through construction to operation.

By doing so, we facilitate the mobilisation of private sector capital, which is vital for closing Africa's infrastructure financing gap.

In the current business climate, a robust risk insurance policy is more important than ever in creating an attractive environment for enterprises and contributing to the continent's economic prosperity.

How does Africa Specialty Risks differentiate itself from other reinsurance companies operating in Africa?

ASR and its team are real experts in the issues that affect the continent, both at the regional and local levels. We have a deep understanding of African challenges and a new way of approaching the continent where we collaborate and work with all local (re)insurers such as Africa Re and SCR.

Also, if you analyse the offerings that are on the market, you will see that we offer tailor-made risk mitigation products, including those that are not generally available on the continent.

As an example; we can establish an insurance framework for businesses and investors to mitigate against existing and future perils, such as those posed by climate change. The impact on livelihoods is critical on a continent where the agricultural sector provides more jobs than any other.

Parametric insurance, which provides for payment after a qualifying event, offers a way to mitigate unpredictable external risks in a way that traditional insurance products are not able to offer. It is one example of the many specialised products that ASR tailors to its client's needs.

What is Africa Specialty Risks' business exposure to Kenya, and how does the ASR perceive the country's long-term development prospects considering its strategic focus on adapting its business lines to meet the specific needs of the region?

ASR has established a strong presence in Kenya, offering a wide range of insurance products including Energy, Liability, Parametric, Property, PVT, and Trade Credit.

Kenya holds great significance for us as a key market, aligning with our strategic objective of expanding into the East African region.

With a physical representation in Kenya, our local team closely monitors market trends, local companies, and emerging needs.

This allows us to respond swiftly to evolving developments. Despite the current challenges, Kenya stands as one of Africa's most financially developed countries and is the continent's 7th largest nation.

ASR holds a positive outlook on Kenya's long-term prospects, considering its consistent growth rates, reaching around 5.5% last year, and maintaining a range of 4% to 5% since 2004.

Furthermore, Kenya's significant renewable energy sector, with over 80% coming from renewable sources, coupled with its favorable climate for solar power expansion, makes it an attractive destination for regional and international companies aiming to contribute towards the green transition.

How will the AFCTA impact the flow of business observed in Kenya and the wider Africa region.

East Africa, with its population of almost 500 million people, already experiences significant intra-country trading compared to other regions like West Africa.

Despite this, we anticipate a rise in business flow not only within East Africa but also between East Africa and West Africa, as well as East Africa and Southern Africa.

We hope that the African Continental Free Trade Area (AfCFTA) will facilitate easier business transactions for SMEs across these regions.

The implementation of AfCFTA is expected to boost information sharing, transparency, and financing support for SMEs throughout the African continent.

Kenya sovereign credit rating was recently downgraded by international credit rating agencies, increasing uncertainty. Can you comment?

ASR acknowledges the credit rating downgrade of the Government of Kenya and focuses on understanding the factors behind this decision to form our own opinion.

Our role is not to comment on the rationale provided by credit rating agencies but to assess its implications on our underwriting decisions.

It is important to note that credit ratings are just one aspect among many that contribute to a country's economic and financial well-being.

Notwithstanding this, credit rating downgrades can have significant implications across various aspects.

Firstly, they can affect investor confidence in a country's economy, leading to increased caution and hesitancy in investing in both government bonds and private investments, thereby impacting capital flows, foreign direct investment, and overall economic growth.

Additionally, downgrades can exert pressure on a country's currency, resulting in a depreciation of its exchange rate, which in turn can affect import costs, inflation rates, and the cost of servicing foreign debt.

Furthermore, credit rating downgrades can signal underlying weaknesses in a country's economy or governance, thereby further dampening economic prospects and influencing business sentiment, consumer confidence, and overall economic stability.

ASR considers these factors alongside other relevant information to make informed decisions in its underwriting process.