Challenges facing insurance
CLOSE TO 60 % OF INTERVIEWEES believe that regulation in their African insurance markets is adequate. On the positive side the executives polled emphasise that today’s regulators have better market understanding and maintain an open and con
2020 has been eaten up by the pandemic, COVID-19. In its wake, we are not sure what meaningful activities can still take place this year. Last year though, the African Insurance Barometer (AIB) successfully carried out a survey of the insurance industry in Africa and came out with a report. With COVID-19 making it look like no one is sure what would happen next, we are continuing to look at the findings of that 2019 survey of the insurance business in Africa. Take a reading...
TO 60 % OF IN TERVIEWEES believe that regulation in their African insurance markets is adequate. On the positive side the executives polled emphasise that today’s regulators have better market understanding and maintain an open and constructive dialogue with insurers to advance the market. In particular the introduction of risk-based capital requirements is applauded by the players for improving security and confidence in the marketplace. Secondly, in some markets the regulator is taking actions to curb the notorious undercutting of rates by closely monitoring the market’s development, increasing capital requirements or by setting minimum rates.
On the negative side, insurers point out that the enforcement of regulation does not correspond with its wording, that regulators either lack the expertise, the resources or the political will to enact and control the regulation. Furthermore, there are complaints that regulation strangles innovation, namely in the case of micro insurance where due to regulatory requirements such a product is no longer commercially viable. The criticism continues that compulsory cessions contribute to close off African markets from foreign competition.
According to the counter argument, these regulatory schemes aim to reduce capital flight. But the risk bearing capacity of the concerned markets is too limited to absorb the risks themselves, while foreign competition might actually be helpful to transfer knowledge and strengthen local risk capacity.
This (2019) year’s cyclone Idiai in March has painfully reminded insurers, clients and obviously the population in Eastern and Southern Africa at large of the devastating natural catastrophe risk in Africa. However, in most markets awareness of the risk is still low. Insurers point out that demand is limited, as clients underestimate or even neglect the risks. Those who seek cover are predominately foreign corporations, which buy the protection as part of their group’s risk management requirement abroad. In addition, beyond of