Insurers, regulators and governments in Africa have the aim of collaboration in clear focus in order to navigate an era marked by climate change, technological advancement, evolving customer needs and complex global risks.
Delegates attending the inaugural CEOs Summit themed ‘Leaders’ perspective: Sustainable growth for the global insurance industry’ that was convened in Nairobi, Kenya, by Kenya Reinsurance Corporation (Kenya Re), were told how collaborations can narrow the protection gap in the continent while ensuring sustainability.
The three-day summit drew over 340 CEOs from 83 countries in Africa, Middle East and Asia. Insurers, reinsurers, regulators and other stakeholders used the event to explore ways of collaborating in the face of new challenges, in particular weather-related risks such as floods, drought and earthquakes that have put insurers’ underwriting models to the test.
Innovation in the face of disruption
Godfrey Kiptum, CEO at Kenya’s Insurance Regulatory Authority, told delegates that for the insurance sector to grow sustainably, the regulatory environment must be conducive to both innovation and sustainable business practices. However, he observed that striking a balance between growth and sustainability is the root of the challenges facing insurance policymakers today.
“Let us first acknowledge the dynamic risk landscape that insurance companies are now facing. From climate risks, natural disasters, cyber threats and pandemics, the scope of risks is expanding beyond traditional models. This calls for a regulatory framework that is both adaptive and proactive,” said Kiptum.
Giving an example of recent floods in Kenya which cost insurers over KES5-billion (US$38.8-million) in claims, Kiptum said extreme weather events are increasing in frequency and severity, directly impacting the insurance sector’s ability to assess and underwrite risks.
“As insurers confront growing losses, regulators are tasked with ensuring that companies have sufficient capital reserves while also promoting risk reduction through ESG [Environmental, Social and Governance] criteria. In this regard, government and regulatory bodies must support disclosure requirements related to climate risks, encourage green investments and create sustainable business practices.
The integration of climate-related risks into insurance policies will ensure that the sector can remain viable even as it manages the financial impact of a warming world. While managing these risks, regulators must also promote innovation within the industry. The regulatory environment must ensure it remains accessible to all. Financial inclusion, particularly in developing economies, should be a priority, with policies aimed at making sure insurance products are affordable and widely available,” said Kiptum.
Building resilience
Alhaj Kaddunabbi, CEO of Insurance Regulatory Authority of Uganda and chairman of East Africa Insurance Supervisors Association, said both the regulations and insurers must speak to resilience in the changing environment.
In his presentation titled ‘Regulatory resilience: Preparing the industry for a changing world,’ Kaddunabbi told delegates that regulators and insurers must at all times put customers at the heart of all they do if they are to build trust and convince more people into buying the innovative products they are coming up with.
“I have always told my audience that insurance sells papers. If that paper is meaningless, then it means they cannot part with their money. That is why we look at safeguarding the policyholders’ interests, so that there is no financial loss,” said Kaddunabbi.
Collaborating for cross-border risks
Delegates agreed that given the growing cross-border nature of risks today, be it climate change, cyber threats or pandemics, it is crucial that regulatory authorities collaborate at international level.
This means frameworks such as the International Association of Insurance Supervisors, Financial Stability Board and other associations of regional regulators must share best practices, harmonise standards and develop early-warning mechanisms to address early systemic risks before they escalate. Simply put, Kiptum said, regulators should co-operate in the formulation of global capital standards and work together.
“The path forward for the insurance sector hinges on the delicate balance between fostering innovation and ensuring stability, protecting consumers and promoting inclusive growth. A thoughtful and adaptive regulatory approach is essential to achieving this balance,” added Kiptum.
“As playmakers, regulators and industry leaders, our responsibility is clear. We must create an environment where insurance companies can innovate responsibly, where consumers are protected and empowered and where growth is aligned with sustainability. This is of course no small talk. But with collaboration, commitment to clear and global consideration, we can build a future-ready insurance sector that serves the needs of today while safeguarding the opportunities for tomorrow.”
Kaddunabbi told delegates that regulators such as those in East Africa were already collaborating and that points to the realisation that markets in Africa are not going to grow in isolation.
“Many other regulators know how many times we meet in order to compare notes of what is happening in our spaces. We have a forum as East African insurance supervisors. And we also have another one at Africa level, and the regional ones, the international ones, which are all intended to ensure that we are up to the game. And we get guidance from the International Association of Insurance supervisors when they issue insurance core principles,” said Kaddunabbi.
Chris Kiptoo, principal secretary at Kenya’s National Treasury, said the insurance sector is at the heart of building resilience as it provides a solution for risk management in the face of climate change shocks.
Fostering partnerships
He noted that governments have no choice but to partner with insurers in improving access to insurance services, especially among the underserved population.
With many economies in Africa still concentrated in climate-sensitive sectors such as agriculture, Kiptoo said insurers and governments have to collaborate to foster innovations if they are to secure sustainable economic growth.
“By working together, we can ensure that the policies align with both the industry’s needs and the governments’ objectives of economic growth, financial inclusion and promotion of social welfare,” said Kiptoo.
“As we continue to implement policies aimed at improving the business environment and attracting investment, the role of the insurance sector remains central. The ongoing development of innovative insurance products, driven by technology, is a key enabler of economic resilience. I am happy to note that these products are reaching sectors that were traditionally not covered and coming up with ways to protect different industries from these risks.”
Collaborating on awareness
Beyond collaborating on product innovation, Kiptoo asked insurers to join hands in enhancing education awareness of insurance so that people accept insurance as a crucial spend for themselves and their businesses.
“Growth of the insurance sector, expanding access to insurance services, especially to underserved populations, will play a critical role in reducing poverty and promoting equity in our country and Africa. I encourage all stakeholders here today to contribute to these national objectives by innovating around products that cater to the unique needs of our people,” said Kiptoo.
Hillary Wachinga, managing director at Kenya Re, said the summit offered an opportunity for the sector players to reflect on what they have done and what more can be done for the betterment of the insurance industry in Africa and beyond.
According to Wachinga, through collaboration, insurance companies can expand their client base, policy holders gain access to robust risk management solutions and the economy benefits from a more financially secured population.
“We like to say that it takes a village to raise a child. For our industry, this is a village, and we all have a part to play to ensure that the insurance sector grows sustainably and responsibly. Our business is anchored on relationship management, and that is what has informed this Summit,” said Wachinga.
“It is not always about competition, but also joining forces to address problems that mutually face our businesses. By fostering collaborative spirit, we can create a win-win situation for all stakeholders.
Wachinga’s sentiments were echoed by Catherine Kimura, board chairperson at Kenya Re, who told delegates that the summit provided an opportunity for insurance players on the continent to draw a shared strategic vision to chart a path into the future.
She said the changing landscape in Africa presents risk managers with a unique opportunity to engage in meaningful dialogue, share insights and to collectively explore the challenges and opportunities that lie ahead for the insurance industry.
“This summit is not just about addressing the issues we face today, but also about crafting a long-term strategy that will guide us and guide our industry through the complexities of the future.
At Kenya Re, we believe in the power of collaboration. We understand the insurance industry plays a critical role in the stability and growth of our economies. As such, it is our shared responsibility to ensure that we are not only prepared to meet the demands of the present, but also strategically positioned to navigate the uncertainties of tomorrow,” she said.
John Mbadi, cabinet secretary at Kenya’s National Treasury, reminded delegates of the need to think beyond their own national borders as they innovate products given that risks are increasingly getting interconnected.
“Remember that the ultimate goal is to build a more inclusive and prosperous Africa and the world. An insurance sector that is responsive, innovative and accessible to all is the cornerstone of this vision. By working together we can ensure that everyone has the opportunity to achieve their full potential free from the fear of financial ruin due to unexpected events because technology has opened up geographical borders. Let us also enhance provision of risk solutions that promote cross-border trade. This will be key to enhancing intra-Africa trade,” said Mbadi.
Collaborating to stay ahead of the curve
Nancy Muhoya, managing partner for Ernst & Young in East Africa, said given the rising pressure to build trust and transparency, the additional disclosures required in the era of sustainability reporting calls for insurers to collaborate within and beyond their borders. She encouraged delegates to put into action the lessons from the three-day summit.
“Increasingly, we see insurance companies coming up with innovative products. I want to applaud them. I also want to applaud those organisations that have started a journey to net zero, because it is the right thing to do in the context of sustainable solvency for the insurance industry,” she said.
“We must think of things that have never been thought of, right? We must be ahead of everybody else. But can we all work together? Whether it is in providing services. Can we ensure that these lessons for these three days do not end here? Rather, we take them into action and implement them.”
Kiptum said insurtechs driven by technology such as artificial intelligence, big data and blockchain should be encouraged as a way of revolutionising traditional models of risk management, customer engagement and claims processing.
“For this, regulators must first of all encourage simplified products that meet the needs of the underserved population and secondly, promote microinsurance and parametric insurance solutions to protect vulnerable communities against natural disaster. Thirdly, they should ensure transparency in terms and pricing of insurance policies so that consumers can make informed decisions.
Viewing regulations as tailwinds
Commenting on balancing business with complying with regulation, Benjamin Andeya, chief risk officer at Gulf African Bank, said the financial sector should view regulations as competitive advantage and not as impediments.
He added that while compliance was initially seen as a police officer or a short stopper, anybody maintaining this view now is actually doing the wrong job.
“He or she is doing a disservice to the organisation that they’re working in. So, compliance to laws and regulations should never be seen as an impediment to doing business. If anything, it should be taken as a competitive advantage in that organisation doing the right thing and actually delivering both its business objectives and also delivering to the customer, but within an ethical manner, and doing things in the right manner,” said Andeya.
Data Commissioner Immaculate Kassait said her office of data protection has seen some resistance on data privacy issues with some players feeling that a lot is being asked of them. This is particularly difficult for insurers thinking of cross-border businesses.
“There is no harmonisation of the data protection regulatory framework. It is challenging because if you are an insurance company in Kenya, you have to comply with different sets of regulations in Uganda, Tanzania etc, and that can be challenging,” said Kassait.
Hartnell Ndungi, chief data officer at Absa Group, said more than 70% of innovations in the insurance sector are likely to come from analysing data and that means understanding customers better to know how to come up with new pricing models and segmenting customers.
“You have to ensure that you not only have a sandbox but you are actually able to use data to innovate. But you must have guard rails on how to use data in your organisations,” said Ndungi, who challenged insurers to have test budgets for experimenting new ideas.