Investment to Rise as Angola Exits Pandemic, Insurance Reform Expected

While the Angolan insurance sector retains a relatively low penetration rate with limited ability to service large and special risk – including large-scale oil and gas projects – local insurance companies are working to counter this by expanding their financial capacities.

Tiago Dá Mesquita, CEO of Aon Angola – a leading global provider of risk management, insurance and reinsurance brokerage – speaks to Africa Oil & Power about the post-COVID-19 pathway to a more robust domestic insurance industry.

What is the current outlook for the insurance sector in Angola?

The insurance market goes hand-in-hand with the markets whose risks it covers. When the [insured] markets rise, so does the outlook for the insurance market, and vice versa. Despite the existence of multiple waves of COVID-19 in different countries, the advent of vaccines will progressively bring about the recovery of the global and Angolan economies. Most market analysts estimate economic recovery to take place this year, and we tend to agree with such projections.

In Angola, while it is hard to say, COVID-19 will likely delay any ongoing and planned initiatives aimed at liberalization of the insurance sector. However, it is worth noting that the Angolan Insurance Regulation and Supervision Agency [the national insurance regulator] has been actively engaged in the production of new insurance legislation and public consultation with interested parties. We expect new legislation to be enacted in 2021.

How can the Angolan government extend legislative reform to allow for greater protection against market volatility?

Legislation is a framework that regulates the actions of investors, companies and other stakeholders, but there is only so much that laws can do by themselves. There has been extensive legislation passed in recent years to improve the business environment, but there is still much to do. One example is land ownership and registry, which – in my view – needs to be reformed.Greater protection from market volatility can only come from economic diversification that brings production to Angola at acceptable costs and allows for a decrease in import needs. COVID-19 has halted many investment decisions, but I expect both foreign and domestic investment to increase as we exit the pandemic, and the global economy recovers.

One other obstacle to diversification has been the difficulty in obtaining financing from the banking sector, despite the existence of public programs aimed at increasing the amount of credit available to domestic investors. Banks complain about the poor quality of many financing applications. One way to overcome this would be for would-be investors to seek support or partnership with players who can bring expertise to the planning, set up and day-to-day management of the intended businesses.

How has COVID-19 impacted the policies offered by Aon, given the elevated risk associated with oil and gas projects?

In general, underwriters have added exclusion clauses to policy wordings related to pandemics or COVID-19 specifically. This has not meant significant changes to the risks most of our clients tend to cover, but it remains an area of focus from our client advisory perspective. The biggest impact of COVID-19 on the policies managed by Aon has been an increased focus of our oil and gas clients on cost containment measures, which brought even higher scrutiny of premiums and the postponing or cancelling of investment decisions (i.e. drilling projects) and their corresponding policies.

What restructuring within the local insurance sector remains to be done to in order to build stronger local insurance capacity?

Some insurance companies have been reinforcing their financial capacity, not only to comply with applicable legislation, but also to allow them to accept bigger risks and reduce the need for facultative reinsurance. This helps build the overall market capacity, although big risks will always require facultative reinsurance support. Perhaps more importantly, the market still lacks the number and quality of professionals needed to handle large and special risks, such as energy, construction, property and so on.