Building African insurance market resilience
Building African insurance market resilienceDecember 15, 2020 •
The need to build greater resilience in Africa and globally has been clearly demonstrated by the devastating impact of the COVID-19 pandemic on our society.
The insurance industry has not been unaffected; work Cenfri did with OESAI and FSD Africa in June indicated that over 60% of insurers experienced a drop in premiums and over 40% raised concerns around future solvency.
The pandemic has also called into question the relevance of the insurance sector for African resilience in the face of great risks. In some markets, claims have not been affected, reflecting limited coverage. In other markets, uncertainty around business interruption claims have demonstrated a limited ability to support livelihoods at scale for a significant risk.
Lessons have been learned about insurance and society that should drive future change. The industry is capable of very rapid adaptation when required, as reflected by the many OESAI members that managed to accelerate digital transformation beyond all expectation during the pandemic. However, the industry and society’s understanding of large risks is woefully inadequate and far greater leadership and investment in information is required to better manage such risks in the future.
Opportunities have also emerged to strengthen the resilience of African insurance markets to build a more resilient Africa. We need to better understand and meet current and future consumer risk needs across households, businesses and governments, based on better data and models. We need to build stronger, more sustainable insurance business models. We also need deep insurance innovation to become more relevant to risk management globally.
How we act now will have significant consequences for Africa’s future resilience. More work is needed to build inclusive insurance markets that help households and small businesses become more resilient. Large risks like pandemics can’t be managed alone, we need new structures to collaborate and finance such risks together as society. Beyond the pandemic, climate change and loss of environment will increasingly pose substantial threats to our food systems, infrastructure and city environments. Insurers have a critical role to play in helping to understand and manage such risks.
We can’t wait for a perfect solution to move towards a more resilient, more sustainable future, instead, we all need to demonstrate individual leadership and seek out partners to build a more resilient Africa.
This article was first published on Cover WebMag.