Funding the frontier: The Link Between Inclusive Insurance Markets, Growth and Poverty Reduction

There has been considerable emphasis in development circles on the way insurance markets can contribute to poverty reduction by helping the poor to preserve assets and mitigate the effects of financial shocks, thereby reducing vulnerability. There has also been significant effort to promote microinsurance to low-income people. However, less has been written about the way insurance contributes indirectly to poverty reduction, i.e. by driving economic growth through risk management and the mobilisation of long-term savings, which can then be intermediated into economically productive assets. 

This report takes stock of market development indicators across a sample of 15 sub-Saharan African (SSA) countries – chosen to be representative of different regions and stages of market development – to unpack the role that insurance markets play in supporting economic growth. It outlines the transmission mechanisms and the preconditions to fulfilling this role, and how the contribution to growth evolves across different stages of insurance market development. It asks some tough questions regarding why, notwithstanding rapid economic growth in many African countries and the growing demand for long-term finance for infrastructure and other uses, insurance markets in SSA remain underdeveloped. The insights gained are then used to explore what can be done to unlock the role of insurance in supporting economic growth and poverty reduction.

The analysis draws on extensive desktop research, interviews with insurers, reinsurers, regulators, donors, experts and rating agencies; and an email questionnaire.2 As a think piece, the aim of this note is to stimulate debate by providing a framework for considering the role of insurance in growth in SSA.

Additional Info

  • Institution: Cenfri
  • Date Published: 2017
  • Document Type: Scoping Note
  • Author/s: Doubell Chamberlain, Wicus Coetzee
 

Funding the frontier: The Link Between Inclusive Insurance Markets, Growth and Poverty Reduction

There has been considerable emphasis in development circles on the way insurance markets can contribute to poverty reduction by helping the poor to preserve assets and mitigate the effects of financial shocks, thereby reducing vulnerability. There has also been significant effort to promote microinsurance to low-income people. However, less has been written about the way insurance contributes indirectly to poverty reduction, i.e. by driving economic growth through risk management and the mobilisation of long-term savings, which can then be intermediated into economically productive assets. 

This report takes stock of market development indicators across a sample of 15 sub-Saharan African (SSA) countries – chosen to be representative of different regions and stages of market development – to unpack the role that insurance markets play in supporting economic growth. It outlines the transmission mechanisms and the preconditions to fulfilling this role, and how the contribution to growth evolves across different stages of insurance market development. It asks some tough questions regarding why, notwithstanding rapid economic growth in many African countries and the growing demand for long-term finance for infrastructure and other uses, insurance markets in SSA remain underdeveloped. The insights gained are then used to explore what can be done to unlock the role of insurance in supporting economic growth and poverty reduction.

The analysis draws on extensive desktop research, interviews with insurers, reinsurers, regulators, donors, experts and rating agencies; and an email questionnaire.2 As a think piece, the aim of this note is to stimulate debate by providing a framework for considering the role of insurance in growth in SSA.

Additional Info

  • Institution: Cenfri
  • Date Published: 2017
  • Document Type: Scoping Note
  • Author/s: Doubell Chamberlain, Wicus Coetzee