Africa is set to achieve a quicker transition to renewable energy than any other continent, Mikir Shah, CEO of reinsurer Africa Specialty Risks (ASR), tells The Africa Report.
Shah is Kenyan and a former CEO of AXA Africa Specialty Risks. His role in Africa-focused reinsurance gives him a unique perspective on energy investment and projects on the continent. He has been seeing an increase in enquires related to solar, wind, geothermal and hydro-electric power projects. Solar is leading the way, with interest spread broadly across the continent.
He points to the fact that climate change is occurring twice as fast in Africa compared with the rest of the world, despite the fact that the continent produces only 3% of world carbon dioxide emissions. “The continent will see the fastest transition,” Shah says. “Africa will be powered more by renewable energy than any other continent,” due to its strong resources in solar and wind, and relative lack of legacy energy infrastructure.
Around 43% of Africa’s population, or 600 million people, lack access to energy, according to the IEA. Fossil fuel exploitation, for example in Nigeria and Angola, has a long history, but has done little to increase access to power or improve living standards for the bulk of the population. Shah does not accept the argument that oil and gas can bring about a just energy transition which broadens access to power. Most of the hydrocarbons recently discovered in West Africa are likely to be exported outside the continent, he says.
- The transition to renewables, Shah says, will be achieved by a mixture of strengthening existing national grids, and by developing local and off-grid solutions.
- A key benefit of increasing access to renewable energy, he adds, is that Africa’s ability to produce its own fertilisers for food production, rather than relying on imports, will be improved.
ASR is backed by Helios Investment Partners, which has a majority stake, and has reinsurers in Mauritius and Bermuda. The company wrote its first policy in February 2021 and has developed a range of reinsurance products, including trade credit, political risk, and kidnap and ransom. It also offers parametric insurance, which is paid out if a defined event occurs, regardless of damage. Examples of such events include rainfall levels and earthquakes.
Climate change, Shah says, creates new risks for solar and wind power in that sunshine and wind patterns are likely to become more unpredictable. Those are among the risks which ASR is covering through parametric policies. The company said in April that its energy division’s per risk capacity had been increased to $38m, backed by Asian reinsurers GIC Re and Peak Re.
- ASR on September 8 announced that it will collaborate with CME Capital Management of Dubai on underwriting political risk and trade credit insurance in Africa.
- These lines of cover are “critical to allow corporations to invest in Africa,” Shah says. The partnership will “help derisk investment from the Middle East into renewable energy in Africa.”
Shah is confident that investment and project insurance demand points to a leap forward for African renewable energy.
The Africa Report