Cell captives

Cell captives

21 August, 2019    
Exploring cell captive insurance in sub-Saharan Africa

Globally, cell captive insurance is a relatively new concept. It grew out of the captive insurance concept, where a corporate entity self-insures its own assets by setting up its own licensed insurance subsidiary. In a cell captive structure one central licensed insurer forms ring-fenced cells issued to other organisations for the insurance of the cell owner’s own assets or the insurable risks of its client or membership base.

Cell captives have been one of the most important steps in the evolution of the captive insurance space and have become an integral component of the self-insurance market in many of the established captive domiciles.

Depending on the statutory or contractual conditions in place, the cell owner can draw dividends on the proceeds of the cell, obtain underwriting from the cell captive insurer and benefit from other insurance-related support functions. The cell captive insurer is accountable for all regulatory compliance and holds the insurance licence that covers the business of all the cells.

The cell captive structure emerged as a way for a corporate entity to access the benefits of captive insurance without setting up its own captive insurance company. However, such first-party business is not the only application for the cell captive model. The cell captive structure can also be used to cover the risks of the clients or members of the cell owner. Such structures are referred to as third-party cell captives.

The cell captive mechanism has the potential to help address some of the structural constraints faced by many insurance markets in sub-Saharan Africa, including a fragmented local industry facing constraints in the provision of specialised risk cover to the corporate sector, and, in the retail market, a lack of market innovation.

In Mauritius, the cell captive structure is successfully leveraged for first-party insurance. In South Africa (the global pioneer of third-party cell captives) cell captives have demonstrated their ability to drive retail innovation and provide an entry path into the insurance market. Other countries, such as Namibia and the Seychelles, have also developed preliminary regulation, while others are exploring potential use cases for the cell captive structure in their jurisdictions.

This study aims to inform regulators who are considering the introduction of cell captives to their market. Based on desktop research and in-depth consultations with market and regulatory stakeholders, it outlines existing cell captive models, identifies the potential roles to be fulfilled by cell captives and highlights key regulatory considerations. It asks two main questions:

  • Use cases: What key insurance market constraints are cell captive arrangements able to address and how?
  • Regulatory design: What are the steps and considerations to design a cell captive regulatory framework to meet the desired use case(s) in a particular country context?

We find that cell captive structures do, indeed, have scope to support the development of insurance markets in emerging economies. They could serve at least four use cases:

  • Specialised risk management
  • Retail innovation
  • Insurance market participation
  • Offshore financial centre development

Key considerations for regulatory authorities that are considering introducing a cell captive framework include:

  • Use case/policy objectives: What would be the use case(s) for cell captives given the particular market realities and policy objectives of the country in question? That is: for which market development outcomes is the cell captive considered an appropriate solution
  • Permitted underwriting functions: What is the scope of the underwriting functions that cell captives will be permitted to perform – first and/or third party?
  • Regulatory framework elements: What should the regulatory and supervisory framework cover to ensure the effective introduction, operation and oversight of cell captive structures? A key consideration is what legal structure is needed to ensure appropriate ring-fencing between cells. Further considerations relate to capital requirements, governance structures and elements of supervisory oversight.

While the cell captive structure is not a panacea, it holds much promise as a vehicle to realise increased inclusion and growth within insurance markets in sub-Saharan Africa.

Download the report here Size 1.7kb

This work forms part of the Risk, Remittances and Integrity programme, a partnership between FSD Africa and Cenfri.

Similar Articles
The Africa Fintech Hub – a platform designed to strengthen fintechs in Africa
Fintechs have the potential to significantly improve the options available to financially underserved individuals. Many fintech start-ups in Africa...
Supporting the development of a digital finance index
Digital financial services are transforming global financial service provision and access. Rapid developments in fintech are disrupting and transfo...
The untold realities of women cross-border traders
A diagnostic study on women cross-border traders between South Africa and Lesotho, Malawi and Mozambique​ ...
Guidance on developing a data and analytics strategy
In today’s data-driven world, many organisations recognise the importance of leveraging data insights to make decisions. However, once they attem...
Unique challenges and opportunities for Earth Observation in Rwanda
When I travelled the windy road from Kigali to the Volcanoes National Park to hike up Mount Bisoke, I spent most of my time looking out the window ...
Case study: Enhancing telecommunications connectivity through data analytics
The Government of Rwanda’s ambitious plan to become a cashless economy by 2024 has seen significant efforts and investments in the cashless a...
Then and now: Is Ethiopia at an inflection point after 15 years of insurance underdevelopment?
Very little has changed in the Ethiopian insurance industry over the last fifteen years but there is a po...
Digitising destinations: a tourist’s journey starts online
COVID-19 turned some of us into virtual voyagers. We spent hours scrolling through posts of p...
Open Finance in Africa: Designing context-appropriate approaches for the financial sector
Open Finance can be defined as the sharing of consumer data between financial service providers (FSPs) and/or third-party providers on the basis of...
State of instant and inclusive payment systems in Africa
  Real-time retail payments that enable consumers to send and receive cross-border and domestic transactions digitally are on the rise ...
Reflections on the policy evolution in Rwanda’s ICT sector
In implementing the ...
Remittances, a vital contributor to the SDGs
Remittances are a valuable lifeline for Africans, with over USD 100 billion flowing into the continent annually from a m...
Impact from the Remittance Access Initiative
KYC and CDD requirements can inhibit access to remittances for low-income, r...
Catalysing the use of data and digital technology for tourism in Ghana
Ghana’s tourism industry presents an exciting landscape for growth, ...
Mutual digital infrastructure could drive formalised, inclusive payments in SADC
Interoperable payment systems improve the efficiency and effectiveness of retail and cross-border payments. Cenfri worked with BankservAfrica on a ...
Public sector data frameworks
If properly catalogued, classif...
An assessment of customer due diligence and identity regulatory frameworks
Innovation opportunities for enhanced remittance access...
Understanding CBDC and its application in emerging markets
Central banks have cited several reasons for considering or piloting central bank digital currencies (CBDC). These inclu...
5 lessons for designing fit-for-purpose health microinsurance
Gakere is a 49-year-old mechanic from Nairobi, and like ...
Revealing the consumer experience of digital finance in low- and middle-income countries
Consumers face several frustrations with the potential to affect their experience of digital financial services. These include system glitches, ina...
Insurance regulation and innovation: An assessment of 8 African insurance markets
To support regulatory authorities in sub-Saharan Africa in promoting inclusive insurance market development, there is a ...
Consumer protection in digital finance
The authors of this report would like to acknowledge the support of the International Dialogue on Consumer Protection...
Data insights in achieving retail growth in Rwanda
The retail and trade (merchant) sector is one of the priority sectors for the ...
Enhancing identity verification for refugees in Uganda
In Uganda, refugees and asylum seekers struggle to cash out their remittances due to challenging and time-consuming identity verification processes...
Training improves ability to unlock value from data
Capacity-development is a vital part of the ...
What will it take to build innovative insurance markets in Sub-Saharan Africa?
Despite the best efforts of sub-Saharan African (SSA) insurers, most African citizens ...
Lessons on improving remittance access in Africa
Learnings from the ...
Agriculture an important policy priority for Rwanda
Agriculture plays a major role in the Rwandan economy: close to 75% of the population’s livelihood depends on farming. However, the majority of t...
Cenfri joins the Smart Africa Alliance
Kigali, Monday 29th August 2022  – The ...
Responsive and responsible regulation
The value of non-legally binding guidance Regulation is ...
CBDC for emerging markets: realities and expectations
Cenfri has deepened its work on CBDC amid growing interest from central banks ...
What is data-driven decision making and what does it mean for Rwanda?
Nothing illustrates the incredible power of data-driven decision-making more than the recent COVID-19 pandemic. Lamenting the disparit...
Holistic risk solutions for MSME resilience in Egypt
Micro, small and medium-sized enterprises in Egypt Micro, small and medium-sized ent...
Building a data skills foundation is necessary to achieve meaningful digitalisation
One of the reasons so much emphasis is placed on digitalisation is...
Private sector partnerships for MSME resilience: Learnings from Africa
Opportunities await insurers and tech providers who are willing to work together ...
Insurance Innovation Dialogue
About the Insurance Innovation Dialogue  To support insurance regulatory authorities ...
The role of different partners for effective MSME insurance
Insurers can partner with digital platforms, lenders and insurance aggregators to offer better products that...
Delivering remittances at the last mile
The role of...
Applying a gender lens to trade finance
Small and medium enterprises (SMEs) are considered engines of economic growth and development, especially in developing ...
Enhancing risk assessment processes for improved remittance access
Early insights from IFAD’s Financing Facility for Remittances and Cenfri Our work wi...
The role of women and finance in climate action
A changing climate affects everyone, but it’s the world’s poorest and most vulnerable, predominantly women and girls, who bear the brunt of env...
Opportunities for remittance-linked insurance products in SSA
A demand-side perspective of the risk management and resilience needs of remittance senders from South Africa to G...
Digitalizing farm to table supply chains in Asia
On-demand transport services and insurtech  Whether as a customer or...
Empowering people to solve problems that matter
How Cenfri makes systemic change happen In helping to build...
Digital platforms supporting MSMEs through Africa’s COVID-19 crisis
The global COVID-19 pandemic has emphasised the importance of connectedness – and micro, ...
Inclusive: Identification that removes barriers to financial inclusion
DataHack4FI in-country winners from Ghana offer a multiple-database-verification API solution to identity verification. A lack of verifiable...
The role of insurance regulators in dealing with consumer data protection risks
Across industries, businesses are collecting, storing and using increasing amounts of consumer data. This has been made possible by the growth in b...