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Insurance

Case Studies Agriculture and Climate Risk Enterprise (ACRE) Restoration Insurance Service Company (RISCO) African Risk Capacity
Instruments Parametric and index insurance Catastrophe bonds

Description

There is very low insurance penetration rate in Africa with 3.5% of GDP compared to the OECD country average of 10%. Insurance penetration is concentrated in a few major markets like South Africa, Egypt, Morocco, Nigeria, and Kenya. Reports suggest that the assets-under-management of African insurance companies were expected to rise to USD 445 billion by 2020. Insurance companies employ a mix of investment strategies but have a relatively low-risk appetite given liquidity needs. Insurance companies are the most advanced in technical know-how on climate risks among all institutional investors and some have capacity for innovation in climate risk transfer.

23 African financial regulators for insurance are members of International Association of Insurance Supervisors (IASA), an international standard setting body for insurance supervisors. The IASA recently conducted a consultation to issue guidelines on the Supervision of Climate-related Risks in the Insurance Sector. It suggests that insurance companies need to undertake qualitative and quantitative assessments of impact of physical and transition risks on their investment portfolio. Such guidance from international organizations can enable African financial regulators to issue guidelines to African insurance companies and steer investment towards sustainable investments.

Risk averse policy approach and/or mandated commercial returns required Risk Appetite

Minimal risk appetite.

Voluntary efforts to embed climate change in investment decisions Climate Mandate

Largely voluntary efforts to embed climate change strategy in investment decisions; may have negative mandate on climate harming investments.

Capital raising unrestricted Ability to Raise Funds

Presence of legal/regulatory frameworks to embed climate change in investment decisions.

Ability to determine funding mandate, approval may be lengthy Flexibility to Deploy Funds

Ability to determine funding mandate and vehicle, though process or change; approval or exemption may be lengthy and difficult.
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This project has been developed in partnership with the Global Center on Adaptation

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