Moody’s Sees Wave of M&A Deals Among Ghana Insurers on New Rules

ACCRA (Capital Markets in Africa) – Moody’s Investors Service is predicting Ghana’s insurance industry will see a wave of mergers and acquisitions after the West African nation’s regulator more than tripled minimum capital requirements.

The move to higher capital requirements is credit positive for the industry, Brandan Holmes, a vice president at Moody’s, said in emailed response to questions. Smaller insurers will either need to raise additional cash or be absorbed by their larger rivals, he said.

Ghana’s insurance regulator last month increased the minimum capital requirement for life and non-life businesses to 50 million cedis ($9 million) from 15 million cedis, giving players up to the end of June 2021 to comply. Reinsurance companies have to boost their cash reserves to 125 million cedis from 40 million cedis.

“We generally view consolidation as credit positive for the sector for a number of reasons, including that it provides the scale necessary to invest in necessary technologies and risk-management capabilities,” Holmes said. “That can lead to a smaller number of more disciplined insurers and potentially lower levels of intense price competition.”

Source: Bloomberg Business News