Insurers bank on increased regional collaboration to address emerging risks

Insurers see a stronger case for cross-border collaboration to wade through emerging risks and climatic changes on the continent. Industry players participating in the sixth CEO Summit organised by Continental Reinsurance said it will take deepened regional collaboration to introduce new products to fit changing customer needs as well as address emerging risks. Nigeria Insurance Commission (Naicom) deputy commissioner in charge of technical matters, Sunday Olorundare Thomas, said introduction of new products requires a calculated and collaborative process to avoid a devastating outcome for the sector. “To retract failure will cost you more than you can imagine. You can allow for failure but there must be a limitation on the amount of failure that we can allow in the system,” said Mr Thomas. The Mauritius Financial Services Commission (FSC) is already leading the way with a regulatory sandbox that allows testing of new products, but said collaboration will yield better outcomes. FSC assistant director Aakash Mishra said the commission is in discussions with other insurance associations over improvement of these rules. The president of the African Federation of Insurance Companies (FANAF), Adama Ndiaye, warned of the need to work together as climate change increases the risk of major catastrophes, pointing to the recent Cyclone Idai and its impact on Mozambique, Malawi and Zimbabwe. “The need for collaboration during emergencies related to climate change is now more important than before,” he told delegates. “We see risks differently, but we need to work together as English-, French- and Portuguese-speaking countries. There are regulations we could compare and bring together to work as a single market,” he said in a panel discussion. Mr Ndiaye sees collaboration enhancing vibrancy in the sector by encouraging capital mobility. However, he also sees different phases of development across the African economies slowing the process. “The process will be long. We will need to integrate markets that are currently at different levels of development,” he said. But the insurers see a stronger case for collaboration to address risks from climate change like Cyclone Idai, which has caused death and injury mainly in Zimbabwe and put several other counties on alert. The African Union created African Risk Capacity to manage disasters at a government level, but this has not solved the problem, according to Mr Ndiaye, who said insurers will therefore have to step up. “A few counties have joined. The need for collaboration during emergencies related to climate change is now more important than before,” he told delegates. Several countries on the continent have suffered from floods and drought, as well as other natural disasters in the recent past. Insurers on the continent have also failed to compete effectively with established firms like Swiss Re, a scenario some delegates link to a lack of clear rules around the need for ratings agency services. Continental Re is among the few firms using ratings agencies to assess their level of strength in deciding which level of risks they can comfortably absorb. Ratings are also beneficial to policy buyers, according to Mr Mishra. However, there was concern that agency ratings are seen as an absolute rather than as a guide and just one of a number of factors to consider – something that leaves African insurers struggling to compete with more mature markets. “We gain more transparency where the buyer of insurance has more information about the DNA of the company they are buying into,” said Mr Mishra. Nigeria’s Mr Thomas said Africa will have to proceed slowly but carefully to be able to confidently take in more risk without struggling. “As much as we want to eat, we have to eat well, because we also don’t want to be choked. It is a process,” he warned.

Insurers bank on increased regional collaboration to address emerging risks

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