Africa’s energy and mining sectors face a structural financial drain: foreign reinsurers capture between 70% and 80% of the continent’s premiums, with mega-projects in oil, gas, and mining traditionally ceding most premiums abroad. This capital flight directly inflates project financing costs and undermines the economic viability of Africa’s extractive industries-the very sectors driving the continent’s industrial transformation.

The Democratic Republic of Congo recently established a specialty reinsurance facility specifically to combat insurance premium evasion in oil, gas, and mining industries, acknowledging what industry insiders have long known: when reinsurance premiums exit Africa, they return as expensive debt. For a typical billion-dollar oil field development or large-scale mining operation, this premium leakage can add millions to project costs while depriving local economies of capital retention that could support further development.

The renewable energy transition compounds this challenge. Africa is projected to represent just 5% of global renewable energy insurance premiums by 2030, despite the continent’s vast solar and wind potential. When African renewable projects must cede premiums offshore due to insufficient local capacity, the energy transition itself becomes more expensive-creating a paradox where Africa’s green future is financed abroad at premium rates.

African reinsurers generated $6.269 billion in premiums in 2024, yet continental reinsurers struggle to absorb specialty risks and major risks from industrialization and infrastructure development. The capacity constraint is most acute in energy and mining lines.

Ghana’s Oil and Gas Insurance Pool, despite pooling capacity from 22 insurers, limits coverage to $50 million-a fraction of typical upstream and midstream property values exceeding a billion dollars. Even this pooled domestic capacity must pass most risk to international reinsurers. Uganda continues to cede $10-11.4 million annually to foreign reinsurers despite establishing an Oil and Gas Insurance Consortium.

Africa Re holds 27% of the continent’s equity capital, making it the largest regional player, yet its oil and gas facultative capacity reaches only $30 million-insufficient for single large-scale projects. When a new liquified natural gas facility in Mozambique or a critical mineral mine in the Democratic Republic of Congo seeks coverage, the bulk of that risk-and premium-flows to London, Bermuda, or continental European markets.

Currency volatility exacerbates capital flight. The Nigerian Naira depreciated 50.22% against the US dollar in one year, with the Kenyan Shilling losing 21.37% and the South African Rand declining 7.21%. These currency pressures force reinsurers to invest surplus offshore as a risk management necessity, accelerating the very capital flight that undermines local capacity building.

African regulators increasingly recognize that premium retention is economic policy, not merely insurance regulation. Congo’s new facility mandates that oil, gas, and mining risks must be presented to the domestic facility before accessing foreign reinsurers, establishing a “right of first refusal” for local capacity.

The 14-member CIMA zone limits offshore cessions by line of business, prohibiting foreign reinsurance for motor liability and marine cargo while capping property damage and general liability cessions at 50%. Since 2020, CIMA insurers must also cede percentages to regional reinsurer CICA-Re, creating forced retention mechanisms.

AfrexInsure’s syndicate model, launched in 2022, achieved 97% premium retention within pan-African insurers and reinsurers for trade and investment risks. This demonstrates that when capacity is deliberately aggregated and properly capitalized, retention is achievable even for complex specialty lines.

Capital flight creates three operational challenges for project developers:

Higher all-in project costs: When domestic capacity cannot absorb large energy or mining risks, cedants access international markets at rates that reflect not only the underlying hazard but also the cost of capital mobilization across borders. The weighted average cost of capital for renewable projects in Kenya and Senegal ranges from 8.5% to 9%, significantly higher than the 4.7%-6.4% in North America and Europe. Premium leakage directly contributes to this financing differential.

Coverage fragmentation: African insurers remain heavily reliant on proportional treaties that cede high shares of risk to reinsurers, while globally only 33% of reinsurance is placed proportionally compared to 90% in Africa. This means African projects face more complex coverage structures with multiple international reinsurers, increasing administrative costs and claim settlement complexity.

Strategic dependency: Offshore reinsurance capacity operates on global cycles and priorities that may not align with African development needs. When international reinsurers withdraw capacity from emerging markets during hard market cycles, African energy and mining projects face coverage gaps precisely when they can least afford them.

For insurers and reinsurers, this represents both challenge and opportunity. African reinsurers achieved 12.5% return on equity in 2023, higher than American and Bermudan companies at 4.6% or Asian companies at 10.2%, demonstrating that profitable underwriting is achievable despite challenging operating environments.

The trajectory of capital flight hinges on three factors:

Capitalization and aggregation: Africa Re reported shareholders’ equity of $1.158 billion as of 2024, but continental capacity requirements for major energy and mining projects likely exceed $10 billion. Without significant capital injections-whether from development finance institutions, sovereign wealth funds, or private investors-the capacity gap will persist. Regional pooling mechanisms like AfrexInsure offer a template, but require political will to subordinate national champions to regional efficiency.

Specialty line development: Energy and mining risks demand specialized underwriting expertise, loss control engineering, and claims handling capabilities that most African reinsurers are still developing. Strategic partnerships with international reinsurers that transfer knowledge rather than merely capacity could accelerate this capability building.

Renewable energy urgency: Global investment in renewable electricity generation is expected to reach $36 trillion by 2040, up from $2.2 trillion in 2024. Africa’s share of this investment depends partly on competitive insurance markets. If African reinsurers cannot develop renewable energy underwriting capabilities quickly, the continent risks financing its energy transition through perpetual premium exports.

For government stakeholders and development financiers, the capital flight challenge is not merely technical-it’s a question of economic sovereignty. Every dollar of premium that leaves Africa to access offshore reinsurance capacity is a dollar unavailable for local development. Addressing this requires treating reinsurance capacity as strategic infrastructure, deserving the same policy attention and capital support as ports, power grids, or digital networks.

The continent’s extractive wealth and renewable future both depend on it.