How are insurance regulators in sub-Saharan Africa being affected by, and responding to, COVID-19?
How are insurance regulators in sub-Saharan Africa being affected by, and responding to, COVID-19?August 25, 2020 •
In the midst of increasing uncertainty resulting from the COVID-19 pandemic, insurance regulators still need to ensure that they fulfil their core mandates of market stability, consumer protection and (in some cases) insurance market development.
The COVID-19 pandemic has affected and disrupted the everyday operations of insurance supervisors – forcing them to adapt and conduct supervision and communication activities remotely. Insurance regulators have also recognised that regulated entities face the increased burden of uncertainty and rapid adaptation too.
As a result, insurance regulators across sub-Saharan Africa (SSA) have had to perform a balancing act between offering regulated entities regulatory relief during a challenging time and simultaneously monitoring vulnerabilities in the market closely to ensure that they fulfil their core mandates and consumers remain protected. Different regulators have so far chosen to prioritise different sides of this trade-off. Some insurance regulators have eased up on their usual regulatory requirements in an attempt to enable regulated entities to enhance their capacity to respond to COVID-19. Others have been more concerned with the set of issues arising from the pandemic, such as the potential for the face-to-face nature of insurance business in their markets to spread the virus.
This note, developed in collaboration with FSD Africa, takes stock of the effect of COVID-19 on insurance markets across SSA as it relates specifically to insurance regulators. It is based on our engagements with 13 supervisors – across 27 SSA countries – as well as with 33 insurance providers (including a survey administered to 68 insurers) and supplemented with desktop research. We focus on the impact of COVID-19 on supervisors and their responses, on the medium- and longer-term implications for insurance markets and on the opportunities arising from COVID-19.
Although the short-term priorities of insurance regulators have varied across jurisdictions in SSA so far, we also identify a set of key actions/responses and implications for insurance regulators to address in the medium- to long-term so that their insurance markets can seize the opportunities arising from the COVID-19 pandemic. For example, many insurance regulators have been encouraging or even requiring regulated entities to innovate and digitise their internal, regulator- and customer-facing processes to comply with the social distancing restrictions put in place to curb the spread of the virus. Although the investments required for this shift may carry considerable short-term costs, provided regulatory uncertainty and regulatory barriers are addressed to encourage and enable these investments, they have the potential to enhance providers’ efficiency and to lead to substantial gains in the medium- and longer-term.
This work was originally published by FSD Africa. It forms part of the Risk, Remittances and Integrity programme, a partnership between FSD Africa and Cenfri.