In 2025, Africa’s insurance industry finally showed the growth that had been expected.
Nigeria alone saw aggregate insurance revenue rise from about $358 million in 2024 to $437 million, an increase of more than 20%. Premiums went up in both life and non‑life insurance, and underwriting looked stronger than it had in years.
Yet when audited results were tallied, many insurers found that these revenue gains didn’t turn into real profits. Foreign exchange (FX) losses and rising claims costs reduced — and in some cases wiped out — profits that had seemed secure.
This wasn’t just a problem in Nigeria, as across the continent, currency fluctuations are becoming a hidden challenge for insurance profitability, market values, and investor confidence.
How currency moves became profit killers
African insurers are increasingly seeing that revenue growth doesn’t guarantee profits, and the reason is simple: foreign exchange volatility.
Many insurers collect premiums in local currency but have liabilities such as reinsurance contracts, overseas debt, or investments, denominated in dollars or euros. When local currencies weaken, these obligations suddenly grow in local terms, eroding earnings even if premium income rises.
That phenomenon became painfully clear in Nigeria in 2025. The naira’s depreciation meant that companies had to revalue foreign currency liabilities upward. Even though revenue climbed by more than 20% year‑on‑year, these exchange rate adjustments eroded reported profits once accounts were prepared at year‑end.
This story is not just limited to Nigeria. In Zambia, insurers have seen that exchange rate fluctuations can significantly affect profit margins and operational costs, especially when investment income and claims payouts are taken into account.
Kenya’s insurers have been hit through reinsurance and investment positions. The country reported about $172,000 in forex losses in the first half of 2025, down from roughly $6.5 million a year earlier as movements in the shilling changed how foreign‑currency obligations were valued and realised. While macroeconomic variables such as GDP growth and inflation affect FX volatility, the link between currency movements and insurance profitability is clear.
Outside Africa, similar patterns have emerged. For example, insurers in Taiwan posted significant losses of nearly $647 million, driven primarily by volatility in the island’s currency relative to the US dollar, showing that currency risk is not confined to emerging markets alone.
All of these examples illustrate one truth: when exchange rates swing sharply, they can turn healthy business performance into disappointing financial results.
Insurance firms are not the only losers
Foreign exchange losses do not just hurt insurers, but their effects also extend to investors, companies, and even governments.
Recent financial statements show how sharply exchange rate movements are reshaping insurers’ performance. A recent analysis of 14 quoted Nigerian insurers found that although gross premiums rose strongly, foreign exchange losses eroded much of the gains, dragging down profit before tax. Growth at the top did not fully translate into growth at the bottom, highlighting the volatility that FX swings can introduce to profitability.
This trend extends across the sector. Across 17 underwriters, aggregate net earnings fell by roughly 34% year-on-year as earlier FX revaluation gains disappeared or turned into losses. In several cases, firms swung from recording sizeable currency gains in one year to reporting heavy exchange losses in the next, even though underwriting performance remained stable. While core operations held steady, overall profit stability weakened as currency pressures intensified.
For investors, FX swings make profits less predictable. Companies may report strong revenue growth, but exchange rate movements can quickly reduce net income. A study in the International Review of Financial Analysis found that exchange rate changes significantly affect the equity returns of banks and insurers in the U.S., U.K., and Japan, especially during volatile periods. This means traditional valuation metrics like premiums, market share, or underwriting ratios may not fully capture a company’s true risk or worth.
Corporate owners with insurance arms or financial subsidiaries also feel strong pressure from currency changes. When profits are affected by exchange rate swings rather than normal business operations, firms have to rethink how they invest and allocate capital. A recent survey of over 750 finance officers across North America, Europe, and the U.K. shows that about 88 % of medium-sized firms hedge against FX risk, and over 60 % are increasing or extending those hedges. Even firms that didn’t hedge previously reported losses from currency volatility.
Therefore, companies that rely on insurers or invest in insurance subsidiaries may face higher costs of capital and more volatile returns if currency exposure is not managed carefully.
The effects spread across the wider financial system. Banks that lend to insurers could see more non-performing loans if profits drop. During periods of sharp naira depreciation, Nigerian companies reported huge foreign exchange losses.
For example, a review of leading firms across sectors found that they incurred a total of about $1.55 billion in FX losses in the 2024 financial year. MTN Nigeria alone accounted for roughly $660 million of this total, including both realised and unrealised losses.
Among manufacturers, 16 large companies listed on the Nigerian Exchange recorded $566 million in FX losses in 2023, a sharp increase from the previous year. Those losses reduced retained earnings and, in some cases, erased profit growth, weakening balance sheets.
Governments and tax authorities feel FX volatility too. Corporate income tax depends on reported profits, and how exchange gains and losses are treated for tax purposes can differ from how they appear in financial statements. In Nigeria, the Nigerian Revenue Service (NRS) has clarified that unrealised exchange differences which are recognised in accounts but not settled in cash, are usually ignored in calculating taxable profits, meaning they do not reduce or increase tax liability, while realised FX gains or losses are included when computing assessable profit.
This creates timing mismatches between accounting profit and taxable income, which can make fiscal projections harder to manage and add complexity to planning for multinational companies and investors.
Lessons from global insurers
African insurers do not need to face foreign‑exchange losses unprepared. Experiences from other markets show that strategic planning and the right tools can reduce the impact of currency swings on earnings and stabilise profitability.
One major strategy is hedging foreign-currency exposure. Insurers in developed markets use forwards, swaps, and options to lock in exchange rates for future obligations. Taiwan provides one of the clearest examples with publicly documented outcomes. In the first half of 2025, several Taiwanese life insurers suffered combined pre-tax losses of approximately $647 million due to sharp currency movements, with FX valuation effects contributing $520 million of the losses.
Following regulatory adjustments that allowed insurers to draw on additional reserves to offset FX losses, major insurers returned to profit in June 2025, posting $1.1 billion.
Korea also demonstrates disciplined FX risk management. Korean insurers hedge roughly 80 % of their foreign-currency bond holdings, supported by regulatory regimes that encourage high hedging activity. Although public figures on actual profits or losses from FX movements are not disclosed, the high hedge ratios suggest that Korean insurers are positioned to mitigate potential currency-induced earnings volatility
Capital buffers remain a critical complement to hedging. Regulatory frameworks ensure that insurers maintain adequate reserves to absorb market, credit, and macroeconomic shocks, including currency volatility. These buffers help protect solvency and policyholder obligations, even in the event of sudden currency swings.
Transparency and disclosure further strengthen resilience. Detailed reporting on FX exposures and hedging positions allows investors and regulators to assess risks accurately, promoting more predictable earnings and better risk pricing.
Finally, pricing strategy can help insurers manage cost pressures in markets with volatile currencies. When exchange rate movements raise the cost of claims or reinsurance, insurers may adjust overall premiums to reflect higher expected costs.
In Ghana, for example, motor insurance tariffs were increased due to inflation and cedi depreciation, showing how pricing can respond to rising costs linked to currency swings. While insurers do not embed explicit FX risk premiums, such pricing adjustments can help cushion earnings against sudden cost increases.
By factoring these broader risk considerations into premiums, insurers can make earnings more resilient to exchange rate pressures.
