Growth in tourism spurs demand for insurance in Cape Verde

A new report from Timetric suggests positive growth for the Cape Verdean insurance industry. Due to stable economic development and a growing tourism sector, Cape Verde has seen an increased demand for personal accident and mortgage related insurance.

The tourism sector in Cape Verde has been growing at a rapid pace. The number of visitors is expected to reach 500,000 by 2015, and just over one million by 2020. In light of this, investors from the UK, Ireland and the US have invested heavily in tourism related infrastructure development projects in the country.

High retention rate may expose insurers’ capital positions during economically challenging times.

Insurers generally invest more in reinsurance in order to avoid financial losses during economically challenging times. In Cape Verde insurance providers tend to retain a large proportion of their revenues and cede less to reinsurance providers. For example, the retention rate of life insurance providers increased from 92.2% in 2008 to 93.1% in 2012. Such a high retention rate reflects the insurance companies’ in-house expertise and high earnings – however it could expose their capital positions during economically challenging times. The insurance industry in Cape Verde remained unaffected by the global financial crisis and grew in terms of written premium at a CAGR of 4.2% during 2008-2012. The industry’s growth was further supported by the significant growth registered in the life insurance segment, which grew at a CAGR of 27.9% from 2008-2012. According to the Timetric report, the overall insurance industry in Cape Verde is projected to grow at a CAGR of 5.2% until 2017.