Insurance industry should prioritise discussion on building climate resilience


Staff Writer

Climate change has become the greatest threat to humankind and sustainability; hence, significant efforts and priorities should be made in the discussion of the insurance industry to play a pivotal role in building climate resilience.

Albert Nduna, the Insurance and Pensions Commission (IPEC) Board chairperson speaking at the ZEP-RE (PTA Reinsurance Company)’s 33rd Annual General Meeting, said the protection gaps are increasing due to the increased frequency of El Nino and La Nina-induced droughts, cyclones, and floods in Africa and beyond, attesting to the fact that climate change is now the greatest threat to human kind and sustainability.

“In our jurisdictions, we should be making significant efforts and prioritising the discussion on the insurance industry playing a pivotal role in building climate resilience.

“One of these efforts is Zimbabwe’s journey to implementing agricultural index insurance, taking lessons from the experiences of Kenya and Uganda, which took the lead in promoting agricultural index insurance for smallholder farmers.

“However, the role of de-risking agriculture starts with the government providing the necessary support, such as premium subsidies, the insurer designing appropriate products for smallholder farmers, and the regulator ensuring the appropriate regulatory environment,” he said.

Zimbabwe was one of the signatory member states when ZEP-RE was founded in Mbabane, Eswatini, back in 1990.

The company has since grown and now has an office presence in nine (9) countries in Africa, has written a cumulative premium of over US$1.7 billion, and has paid over US$1 billion in claims.

Nduna said that against this background, reinsurance companies like ZEP-RE should actively participate in the development of insurance for smallholder farmers by partnering with underwriters so that they can access the necessary capital and expertise to design and distribute affordable and effective insurance products for smallholder farmers.

“The involvement of reinsurance companies in this regard will allow underwriters to offer coverage to smallholder farmers, even in the face of significant losses.

“This will promote smallholder farmers’ resilience against climate-related risks. Zimbabwe experienced a devastating Cyclone Idai in 2019, and up to now, the impact is still being felt in that area.

“Thus, transferring climate-related risks to insurers is more critical than ever,” said Nduna.

He added that “as African insurance regulators on the continent, we are prepared to engage with insurance practitioners on this very important subject of climate-proofing and creating climate resilience.

“This is largely important given our continent’s climate vulnerability and reliance on agriculture.”

According to Nduna, insurance penetration in Africa has been stagnant and, in some countries, declining, and this is partly attributable to inappropriate products on the supply side.

He said in the past, insurance targeted the middle-income segments of society who had regular incomes, but with the growing informalization on the African continent, the middle income is shrinking while the informal sector is growing significantly.

“Conversely, they are the ones that need the cover the most.  It is, therefore, important that reinsurance companies like ZEP-RE collaborate with underwriters in the Member States to develop appropriate products that meet the needs of the previously excluded in line with the financial inclusion agenda,” said Nduna.

At the AGM, Dr Grace Muradzikwa, the IPEC Commissioner, encouraged ZEP-RE to comply with all regulatory requirements and ethical business practices, which not only safeguards the interests of policyholders but also strengthens trust and confidence in the insurance industry.

“On our part as regulators, we commit to facilitating a conducive regulatory environment that fosters growth, innovation, and consumer protection. We stand ready to support you in your endeavours,” she said.