Why it Matters
- High aviation insurance costs and external market volatility continue to constrain airline sustainability and infrastructure investment in Africa.
- Retaining insurance premiums on the continent strengthens local capital pools and reduces borrowing costs for aviation projects.
- Bankable insurance structures are a prerequisite for unlocking aviation finance from development lenders.
- Coordinated, Pan African risk frameworks support trade, connectivity and AfCFTA objectives.
During the 57th Annual General Assembly of the African Airlines Association (AFRAA) in Luanda, AfrexInsure, a subsidiary of the African Export-Import Bank (Afreximbank), presented its approach to addressing structural risk management challenges facing Africa’s aviation sector. The presentation was delivered by Nana Odei, Business Development lead at AfrexInsure, and focused on insurance capacity, premium retention, and the development of bankable aviation projects across the continent.
The session followed broader discussions at the Assembly on airline insurance costs and market volatility, positioning AfrexInsure’s intervention as part of a longer-term effort to stabilise and strengthen African aviation through improved risk management frameworks.
Afreximbank’s Mandate and Trade-Led Focus
Odei began by situating AfrexInsure within the wider Afreximbank Group. Afreximbank is a multilateral development finance institution owned by the 54 member states of the African Union, alongside 11 participating Caribbean nations. Its core mandate is to facilitate trade and develop trade-enabling environments, with the stated goal of supporting a more connected and borderless Africa.
Over the years, Afreximbank has established a range of initiatives and subsidiaries aligned with this mandate. These include the African Medical Centre of Excellence, quality assurance centres, the Creative Africa Nexus (CANEX), vaccine acquisition programmes implemented during COVID-19, and the Fund for Export Development in Africa (FEDA), which provides equity capital. AfrexInsure was created to address risk management challenges within this broader trade ecosystem, specifically focused on the retention of insurance premiums on the African continent.
In 2024, Afreximbank disbursed more than USD 30 billion across the continent, with approximately 51 percent directed to the financial services sector, and the remainder allocated to sectors including oil and gas, manufacturing, trade and exports.
The Case for Premium Retention in Africa
The issue of premium flight centres on the transfer of insurance premiums generated in Africa to offshore markets, driven by limited local and regional underwriting capacity. Odei explained that this outflow of premiums reduces Africa’s pool of capital and contributes to higher borrowing costs, as external lenders apply additional risk premiums when capital is sourced internationally.
Using the example of airport infrastructure development, he described how traditional insurance structures often result in local insurers retaining only a small portion of risk, with the balance ceded to offshore reinsurers. AfrexInsure’s approach seeks to alter this structure by retaining a greater share of risk within Africa through syndication.
To support this, AfrexInsure has assembled a Pan-African reinsurance syndicate led by Africa Re, in partnership with SanlamAllianz, WAICA Re, Continental Re, ZEP-RE, Old Mutual, Swiss Re and others. The objective is to reduce the volume of premiums exported to international markets by distributing risk across African reinsurers with aggregated capacity.
Insurance Solutions for Trade and Aviation
Odei outlined the range of speciality insurance programmes deployed by AfrexInsure, designed to support trade-related activity. These include marine cargo insurance, construction all-risk cover for infrastructure projects, oil and gas insurance, and operational all-risk products relevant to aviation.
AfrexInsure also offers alternative risk structures, including captive arrangements, for entities capable of retaining a portion of their own risk. Within the aviation sector, operational all-risk coverage was identified as a key focus area.
Structural Challenges in African Aviation Insurance
The presentation highlighted several structural challenges affecting aviation insurance in Africa. These include limited access to affordable hull and liability coverage, insufficient underwriting capacity, and heavy reliance on international insurance markets. As a result, African airlines are exposed to price volatility originating in external markets, including fluctuations unrelated to African operational performance.
Regulatory fragmentation across African states was also identified as a constraint. Differences in regulatory standards and oversight frameworks complicate efforts to harmonise aviation insurance programmes, contributing to what AfrexInsure views as an insurability gap. This gap reflects a mismatch between the pace of aviation sector development and the evolution of insurance capacity within Africa.
Why AfrexInsure’s Intervention Is Needed
Odei framed AfrexInsure’s role as a long-term intervention aimed at addressing market failure. This he identified as: inadequate capital and expertise within African insurance markets, the knock-on effects of this failure on aviation stakeholders, and Afreximbank’s mandate to advance trade and connectivity.
Insurance coverage is a critical condition precedent for accessing finance. Without bankable and compliant insurance structures, aviation projects struggle to secure funding from lenders such as Afreximbank.
Five Pillars of the AfrexInsure Strategy
AfrexInsure’s intervention strategy is structured around five pillars.
The first is capacity provision, achieved through aggregating Pan-African insurers and reinsurers to build scale and capital over time. The second pillar focuses on developing technical and underwriting expertise through partnerships with experienced global players.
The third pillar is the creation of tailored insurance solutions designed specifically for African aviation realities, rather than imported models driven by external market dynamics. The fourth pillar emphasises market coordination and collaboration, aligning with broader continental initiatives such as AfCFTA and AFRAA’s convening role. The fifth pillar centres on standardised risk mitigation and risk management methodologies to reduce fragmentation across markets.
Strategic Objectives and Expected Impact
The expected outcome of these interventions is the creation of sustainable insurance coverage across the continent, improved local capacity, and enhanced technical expertise. AfrexInsure also aims to support the expansion of the aviation market through partnerships, standardised practices, and new approaches to risk management.
Odei linked effective risk management directly to lender confidence, noting that lenders require assurance that investments are adequately protected before committing capital. Strengthening insurance frameworks, he argued, is essential to unlocking financing for aviation projects and supporting the sector’s role in promoting trade, tourism and cargo movement across Africa.
