Staff Writer
African insurers must move beyond reacting to shocks and build resilience into pricing, investment, regulation and product design as economic and global pressures continue to expose weaknesses in insurance markets, Coronation Solutions Pvt Limited managing diretor Wadzanai Phiri has said.
Speaking at the 24th Association of Insurers and Reinsurers of Developing Countries (AIRDC) conference in Harare, Phiri said insurers, regulators, brokers, governments and pension fund trustees needed a coordinated approach to ensure global disruptions did not translate into deeper protection gaps for African consumers.
She said the insurance sector needed to put a resilient agenda at the centre of its operations, identifying the pressures facing markets and developing practical responses before they became systemic problems.
Phiri outlined five key moves for the industry, starting with a more realistic assessment of market friction and the risks confronting insurers and their customers.
“We have to be real. We have to see the friction,” she said, urging industry leaders to identify pressures affecting premiums, claims, currency, concentration and access to insurance.
She said the second priority was stress-testing.
“What’s the worst that can happen to us? Whether it’s a pension fund, whether it’s an insurer, whether it’s a life insurer. Do we know what’s the worst?” Phiri asked.
She said stress tests should examine whether insurers and pension funds could withstand severe market disruptions, particularly where large amounts of capital were concentrated in illiquid assets such as property.
“When the claim is there, the real estate market is not going to pay immediately,” she said, warning that institutions could face liquidity pressures while waiting for assets to be converted into cash.
Phiri also challenged pension fund trustees to approach offshore investment with caution, arguing that diversification should not simply become a way of escaping domestic risks.
She said the approval of offshore investment opportunities had generated excitement in some markets, but trustees still had to assess the risks associated with foreign markets, currencies and counterparties.
“You’re going offshore when there are industries that are coming, and as a trustee, you have to be balancing and protecting real outcomes,” she said.
“It’s very important for trustees to weigh the merits and the demerits of keeping your investments locally, and then also diversifying into offshore markets.”
The third element of the resilience agenda, she said, was designing insurance products around the realities of African consumers, particularly the large informal sector.
Phiri said low insurance penetration meant insurers were spreading fixed costs over a relatively small premium base, while households and businesses faced limited capacity to absorb higher premiums.
Africa’s insurance penetration is about 2.8%, she said, highlighting the scale of the protection gap.
She called for simpler and more flexible products that could reach underserved consumers without compromising the sustainability of insurers.
The fourth move was greater coordination between governments, regulators, insurers and brokers. Phiri said regulators had to balance solvency, accountability and competition while creating room for innovation.
“Government has to come to the party. Insurance companies have to come to the party. Brokers need to share data, protocols and response triggers,” she said.
She also urged brokers to look beyond commissions and work with insurers to build sustainable markets, particularly when pricing pressures threaten the long-term viability of products.
The fifth move was accountability, with institutions encouraged to identify a specific intervention, assign responsibility and measure whether it was producing tangible improvements.
Phiri said the industry could not eliminate global economic friction but could prevent it from becoming a local protection crisis.
“Our goal is not to eliminate the global friction. You and I can’t do it. We’re not going to eliminate it, but it is to stop that friction from becoming a local exclusion,” she said.
She challenged delegates to identify the risks most likely to be underpriced, determine when consumer protection conflicts with short-term market pressures, and establish which risks require national, regional or continental responses.
“What’s the big thing? We do have our attorneys, we have our accountants, and they give us insights into the numbers,” she said.
Phiri said the ultimate test of resilience was whether customers were better protected when the next shock arrived.
“What must we do together now so that the next shock does not become the next protection gap for our African continent?” she asked.
