Africa insurers urged to tweak business models to meet ESG goals

Africa insurers urged to tweak business models to meet ESG goals

Africa insurers and reinsurers have been challenged to tweak business models and increase their investments if they are to meet environmental, social and governance (ESG) considerations.

Kenya’s cabinet minister for Treasury Ukur Yatani told the 1,500-plus delegates attending the African Insurance Organisation (AIO) Conference in Nairobi that new business models and more investments hold the key to meeting their ESG goals.

In an address delivered by his assistant, Mr Yatani said the AIO conference’s theme of ‘Insurance and Climate Change: Harnessing the opportunities for growth in Africa’ speaks to what the continent is experiencing currently.

“Insurance industry has a critical role to play in helping companies and nations to manage, measure and reduce the impact of climate change,” said Mr Yatani.

“They therefore cannot continue with their business as usual in the face of increasing frequency and scale of risks linked to climate change. We must adjust our business models to better respond to ESG issues.”

He called for collaborations with other players including governments if they are to “play their rightful roles” in championing and promoting environmental sustainability issues.

In 2012, the United Nations Environment Programme Finance Initiative developed a framework for the insurance industry on the principles for sustainable insurance.

The framework was to, among other things, help insurers embed ESG issues in their business models and raise transparency and accountability of underwriters on ESG issues.

But lean budgets and challenges on their traditional insurance products have been a barrier to increasing focus on ESG.

“I want to encourage insurers and insurers operating in Africa to increase their retention capacity through increased investments on the continent. The increased investments will encourage and ensure that we meet the ESG goals,” said Mr Yatani.

Climate change conversations are being given preference especially as floods, drought, wildfires and locusts disrupt livelihoods in Africa, presenting challenges that insurers can transform into opportunities.

Insurers and reinsurers have been challenged to use the Nairobi conference to take stock of the progress that has been realised in embedding ESG in their businesses.

“As the assembly continues to discuss ESG issues, I urge them to critically examine the achievements and the progress that has been made towards the fulfilment of those goals,” said Mr Yatani.

He said while Africa’s insurance sector has prioritised access and inclusivity, many countries have been slow on developing regulations and rolling out products for the excluded and the marginalised groups.

The Horn of Africa countries – Kenya, Ethiopia, Djibouti and Somalia – for instance, launched an insurance product to de-risk the pastoralist communities but there is still much room to be covered.

The sentiments come at a time when most of the new investments in insurance have been concentrated in Asia, Latin America and Africa because of the expected growth potential.

In 2020, Africa’s insurance premium accounted for about 1% of the world’s insurance premium and this is expected to grow as the continent’s economies grow.

The AIO conference will see speakers present insightful papers on data-driven solutions, agritech and insurance, sustainable insurance opportunities and challengers on increasing insurance penetration.

The annual pan-African meeting has attracted delegates from local, continental and global insurance sector including regulators, reinsurers, brokers, insurers and agents.

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