Insurance, an underestimated tool for sustainable economic growth in Africa

Under the theme, "Then and Now: Reimagining Africa’s Future," the World Economic Forum on Africa brought together regional and global leaders from business, government and civil society to take stock of progress made over the last 25 years, share insights on the present landscape and identify innovative approaches to accelerate inclusive growth to bring about sustainable development in the future.

Swiss Re contributed by organizing a breakfast roundtable called "From Risk to Resilience: Pathways to catalysing economic growth and development."

(Center) Vice President of Ghana, Kwesi Amissah-Arthur

The breakfast roundtable, which was well attended, with the Vice President of Ghana, Kwesi Amissah-Arthur, and several other government representatives and development bankers present, was hosted by former Finance Minister of South Africa and current board member of Swiss Re, Trevor Manuel; and Lord Mark Malloch-Brown, former UK Minister, Deputy Chairman United Nations and Chair of the Royal Africa Society.

A primer on the role of insurance

Martyn Parker, Chairman Global Partnerships highlighted the need for public sector resilience against unexpected shocks, providing examples of several sovereign risk financing solutions carried out the course of the last few years.

He also explained the dual role of insurance as a catalyst for economic development.Firstly, institutional investors (pension funds and insurance companies) have funds available to finance infrastructure projects. But regulation and transparency around infrastructure investments is lacking, and needs to be improved.

To support this, Swiss Re is actively advocating that infrastructure investment be established as a separate tradable asset class. But regulation also needs to be improved, in order to give investors the comfort they need to invest in the continent.

Secondly, Swiss Re and others provide insurance protection for the construction and operational phase of infrastructure projects. In addition, Swiss Re also provides innovative de-risking of cash flows from renewable energy projects, for example through covering the shortfall in power production in case of lack of wind or water, can make projects bankable.

Last but not least, there is the matter of climate-related natural disaster protection and food security –where a major drought or flood not only causes short term havoc, but can destroy years of development gains. To help counter that, Swiss Re is playing a pioneering role in the establishment of innovative insurance solutions granting swift payouts to keep farmers farming. This includes solutions across the spectrum, from sovereign and commercial, to small-holder level.. Altogether, this provides a platform for sustainable growth of what is considered by many as the backbone of Sub-Saharan Africa's industry.

Wanted: CRO

Martyn Parker urged: "It's time to start thinking beyond the obvious on insurance. Governments need to include insurance in their financial tool box to foster growth, and put plans in place."  In order to coordinate those plans, he also advocated the establishment of a Country Chief Resilience Officer – similar to the role that most successful corporations have institutionalized – who can liaise between the public and private sectors to assess the nation's risk landscape and organize the most relevant and effective tools and responses.

Mark Malloch Brown said that monetizing risk management is a powerful concept, breaking through to replace aid –on which many African countries have been reliant on so far.

Trevor Manuel argued: "Although insurance is just one part of the bigger picture –and needs to be looked at in the context of savings and other credit instruments - it's an essential element of de-risking infrastructure investment, in order to unlock capital for Africa. As a former finance minister, I know that we rarely put insurance on our list of priorities –but suggest it's time to we do so, in order to allow Africa to achieve sustainable economic growth, faster."

Frank O'Neill, Head of Africa, Swiss Re concluded that never before has close engagement between government and the private sector been more important, or more opportune. "We hope Africa's political leaders and development agencies will move insurance to a prominent place on their agendas, as a means to achieving the progress they want to see on the continent."

Published 11 June 2015

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