Broader collaboration and partnerships are crucial to building resilience
Key messages from IAIS-A2ii-MiN Consultative Forum in South Africa
On the night of 14 to 15 March this year, winds of 170km/h and heavy rains devastated the lives of over 2.6 million people in Malawi, Mozambique and Zimbabwe. The World Food Programme declared this massive disaster, christened Cyclone Idai, a ‘level-three emergency’, the highest level of crisis, in the category of civil wars in Yemen, Syria and South Sudan. The World Bank expects that the cyclone will cost the three countries more than $2bn in infrastructure and livelihood impact. For Shola Ajibade from Continental Re this is yet another wake-up call for the urgent need for action and collaboration to better manage risk and support sustainable development. Climate and disaster risk insurance is one piece of the puzzle to help people better deal with risk related to climate change and disasters, as outlined by Teresa Pelanda (A2ii) at the 16th Consultative Forum held in Johannesburg last month. However, access to responsible and valuable insurance products to promote resilience remains low in the region. In Mozambique for example, only 10% of claims were insured when Idai hit, as highlighted by Israel Muchena from Hollard Mozambique during the event.
Around 60 participants from more than 20 countries representing all stakeholder groups – including supervisors and policymakers – came together at the Forum to exchange experiences and discuss potential solutions to build the resilience of the most vulnerable segments of the population against natural disasters.
Abdeljalil el Hafre from the Moroccan Ministry of Finance presented one such solution: a coverage regime law in Morocco, adopted in 2016 for the consequences of natural and man-made disasters. The law makes it mandatory for all insurance contracts covering damage to property and third-party liability to also include coverage against natural and man-made disasters. In addition, a solidarity fund for natural and man-made disasters ensures minimum compensation for uninsured persons and also incentivises the population to purchase further insurance coverage. But, for governments to be able to mitigate the financial effects of disasters, they need to have a spectrum of tools available to better plan, prepare, and respond to such events, as stressed by Kipkorir Koskei from African Risk Capacity (ARC), an agency helping African governments mitigate the financial effects of disasters. ‘In the case of ARC’, he said, ‘it is a pre-requisite for governments wanting to take insurance coverage, to develop a contingency plan.’
On the topic of public-private partnerships and collaboration between different stakeholders in finding solutions for climate risk management, Kerwin Martin from the South African Reserve Bank emphasised that the supervisor can contribute to enhance access to climate risk insurance by not only creating an environment where insurers can test new innovative ideas, but also by educating the public and sharing relevant data and information with other stakeholders. The insurance industry on the other hand has a role to play in terms of innovation and technology. The crop insurance product offered by Pula to more than 800,000 farmers in nine countries in Africa and Asia for example is bundled with the inputs farmers already use like seed and fertiliser, as explained by Victor Wang, Actuarial & Analytics Lead at Pula. Technology, such as satellite imaging is used in addition to farm-level yield data to determine insurance pay-outs. Seamless and automated insurance policies ensure hassle-free coverage and pay-outs.
Climate risk is an extraordinary risk that cannot be addressed by either the insurance industry or government alone; a joint approach between different countries is needed to tackle this important topic, reiterated another panellist, Viviene Pearson, from the South African Insurance Association. Eric Kouaghu Tchuisseu from the Insurance Regulatory Authority of Cameroon concluded that a broader collaboration and partnerships that pool resources and collectively address the issue to find solutions are necessary. While the industry can contribute by developing products that are easily accessible, affordable and understandable for smallholder farmers, the insurance supervisor needs to make sure that regulations enable the growth of insurance to cover climate-related risks, rather than create any unnecessary barriers.
The 16th Consultative Forum was jointly organised by the International Association of Insurance Supervisors (IAIS), the Access to Insurance Initiative (A2ii) the Microinsurance Network (MiN) and the InsuResilience Global Partnership, and was hosted by the African Insurance Organisation (AIO).
The next Consultative Forum will take place in Dhaka, Bangladesh in November.
Written by the Access to Insurance Initiative and the Microinsurance Network