Collaboration: Crucial for Innovating, Product Scaling and Closing Africa’s Protection Gap

Collaborations among insurers, reinsurers, governments and development institutions offer a crucial chance for Africa to design innovative products and scale them up in order to narrow the continent’s protection gap in the face of intricate risks.

ZEP-RE Chief Officer for Public Sector and Inclusive Solutions, Linet Odera, explains to Africa Ahead why insurers and reinsurers cannot afford to go it alone, especially in the era of elevated and complex risks such as floods and droughts resulting from climate change.

Could you explain more about what your role at ZEP-RE entails?

My role entails harnessing the power of risk transfer, in our case, re(insurance) to build resilience in Africa in line with ZEP-RE’s mandate and mission to deliver sustainable and innovative insurance solutions for people, communities, businesses and countries. To do that, we collaborate closely with our private sector partners, public sector and development partners to close the protection gap.

You have mentioned the need to measure risks to be able to respond appropriately, yet many African institutions have complained about data gaps. How can institutions like ZEP-RE help in addressing these data gaps?

For a long time, the industry whined over lack of or insufficient data. The truth is, there’s lots of data out there, its quality though, that I cannot vouch for. The challenge for the insurance industry in the region is in understanding where that data sits and how to clean and process it. Insurance companies often deal with data from different systems, vendors, and external sources, making it challenging to create a unified view of their data.

So, we are currently not dealing with the issue of data availability, rather, its accessibility and a general lag in adopting new technologies that enable companies to analyse vast amounts of data, which can lead to missed opportunities in product innovation.

ZEP-RE has invested in partnerships, ventures and digital technologies that support access to quality data that enables us to analyse, model, and price some of the most cutting-edge products in Africa because we are not only trying to solve for profits; it is also our mandate to support the government to unlock and preserve economic development gains through insurance.

ZEP-RE mentioned that your role will include expanding inclusive insurance and sovereign risk solutions that empowers communities. Could you expound on this?

ZEP-RE is a COMESA (Common Market for Eastern and Southern Africa) institution established by governments to foster development of the (re)insurance industry – and so our functional mandate is to increase insurance penetration and deepen financial inclusion & resilience. This is both a business and a development strategy that allows us to achieve our mission of growing Africa’s resilience.

Despite the success within ZEP-RE, the impact in the region remains very limited as measured through insurance penetration, which has remained below 3% in most countries. In the broader financial sector world, a lot of advancements have been made in digital finance, but somehow insurance always lagged. This situation is being made worse by increasing climate-related risks and other disasters and pandemics.

Therefore, innovation in inclusive insurance creates a pathway to protection for those who have otherwise been marginalised and an opportunity for growth and expansion by presenting a new source of revenue for ZEP-RE. Through innovation we can create new solutions that meet the needs of the underserved or excluded consumer segment. By doing this, ZEP-RE will expand the circle of protection and we are opening the door to a new segment of customers, not just for ourselves but for the whole insurance ecosystem.

You held a regional leadership role at the UNDP’s Insurance and Risk Finance Facility (IRFF) where you spearheaded climate and disaster risk financing initiatives. To what extent does your role at ZEP-RE tie in with what you were doing at UNDP?

I like to see my role at ZEP-RE as a continuation of my responsibilities at UNDP, where I was privileged to have laid the foundation for insurance, climate and disaster risk financing. Part of my role was to ensure supportive market functions for (re)insurance and ensuring that we have supportive policies and regulations that support the design, development and distribution of insurance solutions that strengthen the financial resilience of communities, businesses and countries.

I enjoyed the process of supporting, identifying and offering technical support and training to governments in the region in understanding their hazards, vulnerabilities, and exposure to different stressors, facilitating assessment of those risks, and improving the technical capacity of country decision-makers to understand, plan for, and use climate risk information to make informed risk management and financial protection decisions.

Collaboration is at the heart of our mandate. ZEP-RE is a reinsurance company running commercial operations with a dual mandate for profit and development impact. We are predominantly publicly owned, and it is critical for us to work for and with governments and other entities to achieve our mission in delivering sustainable and innovative (re)insurance solutions.

This approach aims to leverage the strengths of each sector, combining regulatory support and policy incentives from the public sector with the technical expertise and infrastructure of the private sector that leads to the development of innovative insurance products. Our development partners have supported these efforts through technical assistance, capacity building, and seed investments that have enabled the launch and in scaling most of our initiatives.

When well constituted, effective public-private partnerships can really help achieve scale and improve how governments, communities and businesses are responding to risk. One of the most innovative partnerships is the De-Risking, Inclusion and Value Enhancement of Pastoral Economies (DRIVE) project that is offering insurance and savings products to pastoralists. Despite being an institution with boots on the ground in the Horn of Africa, ZEP-RE would not have been able to successfully implement such an impactful initiative without the financial and technical assistance from the World Bank and the co-operation of the governments in the region.