Author: TIMOTHYRADIER

Prudential pens commitment that ups its contribution to climate action

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Leading insurer Prudential plc has taken its climate action drive a notch higher by signing the Nairobi Declaration on Sustainable Insurance (NDSI). The NDSI is a collaborative effort by the insurance industry to provide broader solutions to the climate change challenge.

The signing of the declaration continues Prudential’s journey of confronting climate change. The insurer has in the past embraced various initiatives as it bids to cut its own carbon footprint while supporting its customers and nations to tackle climate change.

The Nairobi Declaration on Sustainable Insurance

Prudential signed the NDSI on September 5 at the FSD Africa and Private Infrastructure Development Group (PIDG) cocktail on the side-lines of the Africa Climate Summit 2023 in Nairobi. Prudential Africa Chief Executive Officer, Emmanuel Aryee Mokobi, accompanied by his Deputy Nick Holder; Marketing and Communications Advisor for Africa, Janice Kemoli; and Head of Enterprise Risk Management for Africa, Roelof Coertze, graced the occasion.

While commenting on this, Mr Mokobi emphasised the firm’s commitment to being a voice for a just and inclusive transition to clean energy in emerging markets in line with the companies ESG obligations

According to the UN Environment Programme’s Principles for Sustainable Insurance, the NDSI is “a declaration of commitment by African insurance industry leaders to support the achievement of the UN Sustainable Development Goals.”

UNEP describes the SDGs as “a shared vision to end poverty, rescue the planet, and build a prosperous and peaceful world”.

But, adds the UN agency in the NDSI introduction: “While progress is being made in many places, action to meet the SDGs is not yet advancing at the speed or scale required…”

This is where financial sector players such as Prudential, come in.

The NDSI document points out that, “as risk managers, insurers and investors, the African insurance industry has a key role to play in promoting economic, social and environmental sustainability—in other words, sustainable development.”

5 pillars

The NDSI is based on five pillars. These are: Risk Management; Insurance SDGs; Investment in a net-zero emissions economy; Policy, regulatory and industry engagement; and Promotion of the adoption and implementation of the four Principles for Sustainable Insurance across African insurance markets.

Mr Mokobi adds that Prudential will “collaborate within the working groups to ensure that together, we achieve the goals of NDSI and push our common agenda.” He notes that the NDSI builds on the work of the UN-convened Net-Zero Asset Owner Alliance (NZAOA), where Prudential has been a member of since 2021.

Net-zero by 2050

Prudential is committed to decarbonising its portfolio of assets to net-zero by 2050 and having carbon neutral operations by 2030. Its climate targets include decarbonising its operations and its investments, and engaging with its investees. Notably, 99 percent of the Group’s carbon footprint is from financed emissions.

Mr Mokobi explains that Prudential’s pursuit of its net zero target by 2050 adheres to a principle that the firm values. The insurer is keen to hit its set target while ensuring a just and inclusive transition in the markets it operates in, including emerging ones in Asia and Africa.

Prudential champions the acceleration of de-carbonisation in the emerging markets it operates in, highlighting that such markets may need different de-carbonisation pathways to developed markets. This is in line with its environmental, social and governance (ESG) obligations.

Mr Mokobi appreciates that the financial industry can play an important role in accelerating the energy transition. He says an enabling environment will be crucial in unlocking the insurance sector’s ability to mobilise transition finance.

Transition finance

For emerging markets, raising adequate transition finance is a big challenge – a major barrier to sustainable development for sectors and entire economies.

In 2019 and 2020, an estimated $11.4 billion was committed to climate adaptation finance in Africa. More than 97 percent of the funds came from public actors and less than three percent from private sectors. This is significantly less than the $52.7 billion annually to 2030, it is estimated African countries will need.

To bridge this gap, emerging markets have issued less than 10 percent of all sustainable debts, and majority of this 10 percent is coming from governments. Corporate organisations are not issuing sustainable debt yet.

To support this, Prudential issued a white paper with a threefold purpose. One is to define the case for a just and inclusive transition and its place in meeting the Paris Agreement. Secondly, it highlights the importance that Prudential places on ensuring the transition to a low-carbon economy is just and inclusive. Thirdly, it explores case studies and further actions required, both from Prudential and the wider market. Prudential believes that by using its influence to limit the impact of climate change, its policyholders will benefit, both through reduced impact on their daily lives, and through limiting financial impact on the portfolios it manages for them.

Stronger collaboration

Prudential believes a stronger collaboration between the public and private financial sectors is a crucial element to scale adaptation and resilience finance in Africa and globally. According to Unep’s Adaptation Gap Report 2022, titled Too Little, Too Slow, the estimated annual adaptation needs range from about $160 to $340 billion by 2030.

Making transition finance a reality requires the cooperation of many stakeholders: Regulators, energy firms, central banks, securities exchanges, corporates, and financial institutions, among others.

To add out voice to the importance of collaboration, Prudential Deputy CEO for Africa, Nick Holder, joined other panellists at the UN climate change high level champions dialogue to deliberate on how African insurers, banks, and investors, collaborate with the public sector to scale finance for adoption and resilience in the regions. Mr Holder stressed the need for integrating regulators in the formation of investment instruments, as this would facilitate the process and help in the development of pre-approved or easily accepted investment instrument. He also emphasised the need for Blended Finance with guarantees from Global institutions and Governments to make investment secure.

About Prudential plc

Prudential plc provides life and health insurance and asset management in 24 markets across Asia and Africa. The company’s mission is to be the most trusted partner and protector for this generation and generations to come, by providing simple and accessible financial and health solutions.

Prudential fully supports the just and inclusive transition to clean energy, and published a White Paper on this last year.

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MAURITIUS: $45 million in green bonds to finance 13 solar power plants

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Envolt, a subsidiary of the Mauritian conglomerate ENL, is launching a $45 million green bond programme in Mauritius. The aim is to finance the construction of 13 photovoltaic solar power plants in this island country off the coast of East Africa.

The green bond market is gathering pace in Mauritius. This is thanks to Envolt, a subsidiary of the Mauritian conglomerate ENL, which is launching a 2 billion Mauritian rupee ($45 million) programme. Envolt’s first green bond issue is for 510 million Mauritian rupees, or $11.5 million.

The programme is expected to run until 2028. The proceeds of the green bonds will be used to finance the construction and operation of 13 solar photovoltaic parks with a combined capacity of 14.4 MWp. The plants in Mauritius will be completed over a period of 10 to 17 months. According to the UK-based finance company FSD Africa, which is backing the deal, the issue represents an important milestone for the Mauritian renewable energy sector, as well as for the country’s capital markets, as it is the first green bond issue to finance clean energy in Mauritius.

In addition, “these green bonds will be the first of their kind issued in Mauritius under the 2021 Green Bond Principles (as devised by the International Capital Market Association [ICMA]), which are aligned with global standards and combat greenwashing by requiring rigorous assessment of projects and their respective environmental or emissions claims,” says FSD Africa.

The Envolt transaction is being advised by MCB Capital Markets, an investment bank based in Port Louis, Mauritius. It is part of the Southern African Development Community (SADC) Green Bond Programme supported by FSD, which runs until March 2024. Mauritius’ participation in this programme will accelerate the maturity and expansion of the Mauritian capital markets and advance the country’s efforts to attract private investment.

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Stove maker floats Sh1.5bn bond for Kenya, Nigeria upgrade

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Cooking stove manufacturer Burn has issued a $10 million (Sh1.5 billion) green bond whose proceeds will support clean energy projects in Kenya and Nigeria.

The company said the proceeds from the bond will allow it to increase its existing manufacturing capacity in Kenya as well as launch a new manufacturing facility in Lagos, Nigeria.

“Production will increase from the current 400,000 units per month to 600,000 units and will produce a range of life-saving biomass, electric, and LPG (liquefied petroleum gas) stoves,” it said in a statement.

The funds from the green bond are poised to extend these benefits to an extra two million households in the year 2024.

“Our decision to issue the first green bond to support clean cooking underscores our strong belief in the power of financial innovation to drive positive environmental and social change. Leveraging benefits such as investment communities’ interest in green financing and potential tax advantages to investors, green bonds have gained considerable traction in recent years. Burn is excited to deploy this innovative instrument to catalyse sustainable development” said Peter Scott, CEO and founder of Burn.

The US firm launched its first full manufacturing facility in Kenya in 2014. A brief on its website said that the solar-powered facility has a capacity of 250,000 stoves per month.

The bond issuance was supported by Dry Associated Limited, acting as the placement agent with FSD Africa, a specialist development agency funded by UK International Development, providing technical input on the bond framework and contributing technical assistance for the second-party opinion which was conducted by Agusto & Co., the leading Pan-African Credit rating agency and green bond verifier.

“We’re proud to have supported this landmark issuance, the first-ever green bond to finance clean cooking activities in sub-Saharan Africa. Biomass fuel is the main source of energy for cooking for the majority of households in Africa and the proceeds from this capital raise will support these households to transition to more sustainable alternatives” Evans Osano, director of Capital Markets, FSD Africa, said.

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World’s Largest Cookstove Manufacturer To Open Nigerian Plant After Record Green Bond

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BURN Manufacturing, the world’s leading clean cookstove manufacturer and distributor, plans to open a new plant in Nigeria’s economic capital, Lagos, after issuing Sub-Saharan Africa’s first-ever green bond.

The Kenyan firm said Friday that proceeds of the $10 million bond will also allow it to increase existing manufacturing capacity in its home country.

Production will increase from the current 400,000 units per month to 600,000 units and will produce a range of life-saving biomass, electric and LPG stoves.

“Our decision to issue the first green bond to support clean cooking underscores our strong belief in the power of financial innovation to drive positive environmental and social change,” Peter Scott, CEO and Founder of BURN, said.

“Leveraging benefits such as investment communities’ interest in green financing and potential tax advantages to investors, green bonds have gained considerable traction in recent years. BURN is excited to deploy this innovative instrument to catalyze sustainable development,” Scott said.

The bond issuance was supported by DRY Associated Limited acting as the Placement Agent.

FSD Africa, a specialist development agency funded by UK International Development, played a key role in providing technical input on the bond framework and contributing technical assistance for the second-party opinion which was conducted by Agusto & Co., the leading Pan-African Credit Rating Agency and Green Bond Verifier.

“We are proud to have supported this landmark issuance, the first-ever green bond to finance clean cooking activities in sub-Saharan Africa,” Evans Osano, Director, Capital Markets, FSD Africa, said.

“Biomass fuel is the main source of energy for cooking for the majority of households in Africa and the proceeds from this capital raise will support these households to transition to more sustainable alternatives,” Osano said.

“These are not only better for the environment but also have health benefits from the reduction of particulate and carbon monoxide emissions which particularly impact women given their greater exposure,” Osano added.

Sub-Saharan Africa urgently needs to mobilise $50 billion annually to address climate adaptation in agriculture, power and urban infrastructure, according to the UN Economic Commission for Africa and the International Monetary Fund (IMF).

Rising temperatures, sea levels, and worsening erratic rainfall are increasing the frequency and intensity of natural disasters and disrupting agricultural production, damaging infrastructure and threatening the sustainability of urban areas in the region.

The expected public financing available from national governments and international donors is however unlikely to be able to meet the financing needs of the region, underscoring the need to mobilise private capital.

A 2022 report by the International Energy Agency on the Africa Energy Outlook suggests that achieving universal access to clean cooking fuels and technologies by 2030 requires shifting 130 million people globally away from dirty cooking fuels each year.

The issuance of green bonds provides a crucial avenue for supporting this shift towards the adoption of cleaner cooking solutions for people.

BURN stoves have been independently verified by reputable institutions such as University of Pennsylvania, University of Chicago, as well as through a comprehensive impact assessment survey conducted by Yunus Social Business. The stoves have consistently been proven to provide substantial health, financial, and climate action benefits.

The funds from the Green Bond are poised to extend these benefits to an extra 2 million households in the year 2024.

Ikechukwu Iheagwam, Regional Director (East Africa) Agusto & Co. expressed delight for supporting BURN Manufacturing in providing a Second Party Opinion (SPO) on this landmark issuance of the first-ever green bond to finance clean cooking in Africa.

“BURN displayed transparency in its pursuit to reduce greenhouse gas emissions following the very detailed scientific process backed by international standards and robust laboratory testing to ensure that the cookstoves consume less wood and charcoal fuel at ISO/IWA Tier 4 thermal efficiency ratings levels,” Iheagwam said.

“While this project is expected to have a significant positive environmental impact in terms of tons of firewood saved and tons of carbon dioxide emissions mitigated for each stove manufactured, the catalytic social, financial, economic and health benefits are quite compelling,” Iheagwam added.

According to Reuben Mabishi, head of research at Dry Associates Investment Bank, the company is proud to have been the Transaction Advisor on BURN’s Green Bond programme.

“The Green Bond programme underscores the opportunities available for fixed-income investments in Kenya to catalyze capital formation, employment, and economic growth,” Mabishi said.

“We are attracted to BURN for the leadership team’s focus, green finance acumen and the scale and professionalism of BURN’s manufacturing operation in Kenya. BURN’s export growth story is a stellar example that Kenya can indeed deliver quality to the world,” Mabishi added.

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Pioneering Fund to help realise Africa’s green infrastructure aspirations

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By Ralph Gilcrist, FSDAi Advisor and Amos Gachuiri, FSDAi Senior Manager, Investments

Africa has a huge social and green infrastructure deficit. To close this gap, funding shortfalls must be addressed.

FSD Africa Investments (FSDAi), the investment arm of FSD Africa which receives funding from UK’s Foreign, Commonwealth & Development Office (FCDO) , has committed to help establish a pioneering export credit finance fund, Acre Export Finance Fund, specifically for the development of green and social infrastructure in Africa. Acre Impact Capital is a newly established fund manager raising a US$300 million fund to invest in climate-aligned essential infrastructure in Africa alongside various export credit agencies (“ECAs”). In doing so, it aims to prove the case for a new investment asset class on the continent – ECA-backed debt securities as an appropriate high-impact mechanism to deliver financing for the much-needed infrastructure services (e.g. access to water, clean energy, safe and green transportation, etc.). This new asset class will give impetus to Africa’s green aspirations by diversifying financing sources towards Africa’s infrastructure financing demands.

In the world’s more developed economies and increasingly in developing economies, ECAs provide financial support to exporters from their home countries, usually in the form of financial guarantees. These allow sovereign borrowers to raise long-term loans at favourable rates from banking institutions. But ECAs only guarantee a portion of the total funding requirement (typically 85%), leaving an uncovered funding shortfall required to complete the deal. This is the funding gap that Acre aims to fill. In doing so, Acre will be able to take advantage of the sovereign guarantees offered to the main ECA-backed funding tranche, which have historically low rates of default.

Acre has been involved in recent ECA transactions in Africa on an advisory basis, highlighting the kind of deals that it may eventually invest in and in anticipation of the fund’s first closing later this year. One such transaction involved €225m of loans provided to the Ministry of Finance in of a West African country to build three regional hospitals. 85% of the total funding was guaranteed by a European ECA and provided by a European bank to purchase services from an experienced healthcare contractor with long experience of building and running three public hospitals which will add significant capacity to the country’s health infrastructure and provide free health services at the point of use. An African ECA provided guarantees for 85% of the balance, which was funded by local African banks and institutional investors, leaving only €5m as the residual, uncovered portion. This loan was warehoused for Acre by an asset manager and Acre has an option to acquire this portion when the Fund closes later this year.

The Eurobond markets have all but dried up for many emerging market issuers as USD and EUR interest rates have risen which in turn has occasioned a flight to safety. The availability of an ECA-backed funding package means that a creditworthy sovereign borrower (e.g. Cote d’Ivoire, Senegal, Angola) can still fund the purchase of basic infrastructure, underlining a key advantage of ECA financing as counter-cyclical source of financing when capital markets are challenged. In addition, in the example above, the involvement of a locally based ECA and financiers also ensures a substantial level of local procurement and the terms of the funding (15 years for the ECA-backed portion in Euros with solid security) means that this type of funding instrument should appeal to long-term institutional investors, both international and local.

Acre Impact Capital’s Export Finance Fund is anticipated to have substantial developmental impact whilst generating attractive risk adjusted returns to investors. It will enable many worthwhile green and social infrastructure projects to proceed with the availability of financing and go a long way towards demonstrating the attractiveness of ECA-backed debt securities to institutional investors, thereby potentially crowding in private sector investment. FSDAi has invested £10m into the fund thereby encouraging the participation of other strategic and financial investors to reach an anticipated first close of $100m. With enough demonstration effect, Acre’s strategy should spur further interest in ECAs as an attractive source of financing and attract local institutional capital in such future structures and increase the share of infrastructure projects on the continent that tap into ECAs for funding.

FSD Africa Investments (FSDAi) commits US$3 million to Carbon Value Exchange Ltd (Cavex), a pioneering digital platform linking buyers to small-scale carbon projects across Africa

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The latest investment represents a consolidation of FSD Africa’s early stage support to the project and makes FSDAi an early investor in an innovative digital market and payments platform set to revolutionise the voluntary carbon market.

30th October 2023, Nairobi – FSD Africa Investments (FSDAi) has invested US$3 million in Carbon Value Exchange (Cavex), a digital market and payments platform set to revolutionise the voluntary carbon market by allowing small producers of carbon credits such as farmers and small businesses to sell direct to corporate buyers. The platform aims to channel over US$500 million in carbon financing to small-scale green projects by 2030.

The Cavex platform uses cutting-edge technology to remotely capture real time data on the projects’ activities and calculate how much carbon is being displaced or removed as a result. This means buyers will have full transparency around the credits they are buying and can have confidence that the information they are being given is accurate.

The technology minimises the time and cost required for projects to validate and transact their carbon credits which until now has meant only larger renewable projects such as wind or solar farms, or businesses could afford to join schemes that allow them to trade carbon credits with buyers. Crucially, proceeds from the sale of carbon credits on Cavex will flow directly to the companies, people and communities running the projects using digital finance (e.g. mobile wallets), thereby increasing end to end transparency. By aiming to return 90% of transaction proceeds to project participants through digital finance, Cavex will play a pivotal role in amplifying small-scale, high-quality carbon projects and expanding market access for carbon offset projects across sub-Saharan Africa and eventually the Global South.

FSDAi’s investment is part of a seed funding raise of US$6 million by Cavex which will fund the next stage of its development to commercial viability. This includes early-stage convertible grant support from FSD Africa’s Digital Innovation team (amongst other co-grantors) for the platform’s core development by 4R Digital Ltd, the team which has incubated Cavex from concept to the current stage of investment. FSDAi’s investment in Cavex complements its existing portfolio that enables capital allocation to Africa’s green economic growth by backing existing asset managers and venture builders (examples include Africa Climate Ventures, Nithio, Persistent Energy, InfraCredit, Spark Energy and Catalyst Fund).

FSDAi makes investments in support of innovative financial instruments, facilities and intermediaries that can accelerate the role of finance in Africa’s green economic growth. It is funded by UK International Development and works alongside FSD Africa, bringing different financing tools to play to incubate (FSD Africa) and pave the way for FSDAi early investment.

One of FSDAi’s distinctive features is its mandate to take significant investment risk. FSDAi fills an important funding gap by assuming the commercial risk of novel financial solutions that neither development finance institutions nor private investors are prepared to take.

Anne-Marie Chidzero, CIO, FSD Africa Investments, said: “Cavex is a marketplace platform that can radically expand the reach and impact of the voluntary carbon market across Africa through its use of digital technology and mobile money. This technology will allow rural and urban, micro to large businesses to sell their credits to large off-takers in the global North through the aggregation features of the exchange. This means that small and rural producers can participate and benefit from Africa’s great potential to be an exporter of carbon credits.’’

Nick Hughes, CEO and Co-Founder, Cavex, said: “This investment will help us prove how digital technology can open-up climate finance for many people, communities and projects that are displacing or removing carbon. Cavex has the potential to scale in the way mobile money scaled 15 years ago when Kenya and M-PESA spearheaded a global wave of digital finance. More widely, Africa has a huge role to play in the evolution of carbon markets and in this context, it is critical that we find ways to distribute climate finance more equitably and in a way that has real socio-economic impact.”

About Cavex

Cavex is a digital market and payments platform that connects buyers of carbon offsets to small-scale high-impact projects in the Global South. Cavex enables access to carbon financing for a wide range of small-scale projects with the objective of channelling over $500m to projects by 2030. The innovative approach drives efficiencies by utilising digital technologies and data capture to reduce the time and costs for projects to validate and transact their carbon credits. Cavex also utilises mobile money and innovative digital financial services to ensure that the majority of sales proceeds are channelled directly to projects and project participants.

For insurance industry, poor awareness slows growth

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The Nigeria’s insurance industry has recorded moderate growth in business expansion but still has low penetration when compared with other African countries, NIKE POPOOLA reports

As of the end of June 2023, the insurance industry’s total assets rose by 10.7 per cent to N2.7tn from 2.4tn reported in the corresponding period of 2022, according to the National Insurance Commission.

NAICOM’ statistics department revealed in its Bulletin for Q2, 2023, that the insurance industry’s balance sheet showed assets of non-life business was N1.63tn, while assets of life business stood at about N1.07tn.

The industry generate N551.4bn gross premium written in the first six months of 2023; It had generated N726.2bn gross premium written in the whole of 2022 financial period.

However, despite improvement in the industry’s businesses, the penetration was still below one per cent, according to industry figures.

On contribution to the larger economy, figures obtained from the Nigerian Bureau of Statistics reveal that the finance and insurance sector consists of the two subsectors, financial institutions, and insurance; the former accounted for 90.78 per cent and the latter, 9.22 per cent of the sector respectively in real terms in Q2, 2023.

As a whole, the sector grew at 28 per cent in nominal terms (year-on-year), with the growth rate of financial institutions at 30.41 per cent and 8.29 per cent growth rate recorded for insurance.

The sector’s contribution to the nominal GDP was 4.01 per cent in Q2, 2023, higher than the 3.63 per cent it represented a year previous, and lower than the contribution of 4.11 per cent it made in the preceding quarter.

The contribution of finance and insurance to real Gross Domestic Product totalled 5.26 per cent, higher than the contribution of 4.25 per cent recorded in the second quarter of 2022 by 1.01 per cent points, and lower than 5.35 per cent recorded in Q1, 2023 by 0.08 per cent points.

Perception

According to Mrs Augustina Steve of NAICOM, lack of trust and confidence in Nigerian insurance industry resulting from non-settlement of claims, constitute one of the biggest challenges of the industry.

“Non-settlement of claims has negatively impacted confidence in the industry,” she says.

In Nigeria, she notes, the problem of insurance industry is bad image.

This, according to her, for decades, perception stood as bane of the industry’s growth.

Steve says, “The bad image problem of the industry dates back to early 19th century when Nigerians took over insurance business from the early British managers.

“The way the then Nigerian managers carried out insurance business transactions especially in the area of claims payment made the public to see insurance as a scam.”

Ability to pay claims is the real test of a solvent insurance company, she notes.

She says that the quality of claims administration can make or mar an insurance company.

The NAICOM staff says, “Ideally, insurance business is all about claims payment, since claim is the main reason a policyholder takes up an insurance policy.

“Without claims being paid by insurance companies, people are not likely to take up insurance policies, and insurance company will not maximise profits, thus claims payment in insurance contract serves as spice that attracts potential policyholders to insurance patronage.”

She observers that experience has shown that some policyholders are dissatisfied with how they are treated by the insurers when loss occurs.

Some of the complaints by claimants about insurance claims management, she notes, are insurance companies’ request for too much evidence and documentations to prove a loss; some claims are not settled because the insurer refuses to admit liability; when claims are settled, they are not paid in full.

Other complaints, she says include that some claims are rejected on purely technical grounds; claims are generally unduly delayed; the insurer argues that the claims are fraudulent, among others.

Challenges

According to the President/ Chairman Of Council, Lagos Chamber Of Commerce & Industry, Dr. Michael Olawale-Cole, the insurance industry has experienced minimal growth in real terms over the years due to various challenges faced by stakeholders.

“These challenges include limited awareness among the general population regarding the significance of insurance, low purchasing power, disruption from technology, unfavourable economic conditions, apathy toward filing claims for damages, and diverse religious and cultural sentiments, among other factors,” he says.

The Nigerian insurance industry, despite its enormous potential, he observes, is still at the infant stage and far behind its African peers judging by key indicators.

According to the global insurance market report, he says, the insurance penetration rate for Nigeria and South Africa is 0.5 and 12.2, respectively. While other leading emerging economies, kenya (2.9) and ghana (1.2) have low insurance penetration rates, Nigeria has the lowest figure comparatively, despite being the largest economy in Africa, he says.

Undoubtedly, the LCCI boss says, the insurance sector has potential for development due to various alterations in the regulatory framework, necessitating future modifications in the operational practices.

He says, “It has the potential to achieve enhanced success in the aftermath of the pandemic via the adoption of novel strategic approaches by its stakeholders aimed at growing the sector.

“The future of the insurance business hinges on the extent and speed of digital transformation since it has the potential to enable industry participants to secure a significant market share. Digitalisation will provide a streamlined and efficient experience for clients entering the insurance sector.”

Awareness

The President, Chartered Insurance Institute of Nigeria, Mr Edwin Igbiti, says insurance plays a pivotal role in safeguarding the financial well-being of individuals, businesses, and even governments.

It serves as a safety net in times of unexpected circumstances or unforeseen events, he says.

Igbiti says, “Our aim as insurance practitioners is to educate and provide peace of mind to our clients, ensuring that they are adequately covered and prepared for any risk that may arise.

“We face certain challenges that hinder the growth and effectiveness of the insurance industry in our community. Lack of awareness about the benefits of insurance and its role in economic development is prevalent among our people.”

The CIIN boss seeks the support of the government and other organisations in creating awareness campaigns to educate the public and promote a culture of insurance, emphasising its importance in mitigating risk and protecting their assets.

“We request assistance in advocating for policies and regulations that promote transparency, fairness, and sustainability within the insurance sector,” he says

Service delivery

Head SERVICOM, Adeyemi Abubakar, attributes poor insurance penetration in Nigeria to the peculiar market environment, limited public awareness and negative public perception by those who are aware of insurance.

“But in the reality, inadequate service delivery is a major challenge to why insurance acceptance has been very low,” he says.

According to him, building confidence and promoting public understanding on the insurance mechanism, effective consumer protection and education will build consumer trust and confidence, consumer trust builds the insurance market through insurance premium volume.

He says that insurance market growth generates savings, investment and employment.

Insuretech

Mr Ibrahim Ngaski of Information Technology Department, NAICOM, says digital technology has taken the world by storm affecting, changing and improving the way things are done.

The insurance industry, he notes, is currently lagging behind and needs to reassess its business model, re-evaluate its strategy and make the digital agenda a high priority.

It is time for insurers to evolve and respond to these changes in order to meet up with customers’ expectations; and that requires a different set of skills, culture and operating model, he notes.

He explains that, “The term ‘Insurtech’ is coined from the combination of two words ‘Insurance’ and ‘technology’.

“Insurtech is the use of technological innovations designed to make the current insurance model more efficient. People in modern society want to be able to buy travel insurance, life insurance, health insurance, property insurance, and other products with the tap of a finger on their devices, rather than having to sift through stacks of forms.

“Insurtech start-ups are aware of this and have developed a method, for people to obtain easily accessible and ultra-customised insurance policies.”

NAICOM, he says, recently partnered with FSD Africa 2022 to launch the BimaLab Insurtech initiative in Nigeria, which will enable the implementation of ideas for improving insurance in the country.

He says, “BimaLab Nigeria aims to close insurance market gaps by educating, nurturing, and promoting innovations and Insurtech start-ups.

“The innovators were selected to participate in the 10-week programme that provide them with the expertise, resources and support to develop and scale market-ready solutions that bring social and or commercial value to Nigeria’s Insurance sector by bringing creative ideas to the table.”

According to him, insurance companies can maintain a competitive edge by automating, improving and optimising their business processes without compromising efficiency, quality, and response time.

This will enhance employee productivity, speed-up processes, raise customer service levels, improve customer experiences, reduce operational expenses and increase operational efficiency, he says.

He adds that there is an urgent need for the insurance industry to adopt technologies to provide digital solutions.

When this is done, he says, it will improve access to insurance by providing digital channels of distribution, enhancing easier access to insurance products and coverage, speedy issuance of coverage and claims payment and provides Innovative products to their customers.

Growth initiatives

The Commissioner for Insurance, NAICOM, Sunday Thomas, says, the commission has shown a positive attitude to market development by the release of the Soundbox guidelines which is an instrument to test ingenuities in the market.

He says the commission seeks to facilitate and promote innovative insurance solutions that will address the gaps in current insurance offerings.

He adds that, “there is the urge to intensify the ongoing drive to facilitate platforms that address the demand-supply gap; encourage specialised products that addresses the needs of the oil and gas industry; Address all potential regulatory impediments; support the development of human capacity and ensure technical capacities of insurance suppliers; ensure adequate risk pricing and comprehensive coverages and risk management

“As the regulator, we are committed to creating an enabling environment that will consistently enhance increased capacity of the Insurance Institutions both financially and technically.”

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African alliance targets financial instrument for mangroves

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Financial instruments supporting mangroves and forestry are under consideration by members of the African Natural Capital Allliance (ANCA), an executive at the organisation has said.

ANCA is in conversation with financial institutions looking to create innovative instruments that support mangroves and forests, according to Dorothy Maseke, head of ANCA’s secretariat.

“ANCA and FSD Africa are looking towards supporting a number of specialised financial instruments in mangroves and forestry,” Maseke told Carbon Pulse.

These could combine elements of bonds, guarantees, and insurance, she said. Established in 2022 by non-profit FSD Africa, ANCA is an African-led initiative whose members – including the likes of Standard Chartered, KCB, and Equity Bank – together manage assets of $390 billion.

Conservation bonds could be a key area of expansion for ANCA members, Maseke said.

“The discussions on opportunities are real. We are doing a lot in terms of connecting our partners, to support them on this journey, because many are interested. They just don’t know where to start,” Maseke said.

Regulation needs to change to support conservation-related bonds as “capital market structures in Africa do not necessarily support them,” she said.

“When the regulator supports capital market structures that will support this kind of investment, then it gives financial institutions, investors, and private equity the confidence to put their money on the table,” she said.

“It also enables fund managers or advisory firms to actually develop these bonds. Those are some of the things that ANCA will be pushing for.”

The only conservation-related bond on the continent to have been issued so far was the World Bank’s ‘rhino bond’, a $150 million issuance in 2022 in support of black rhinos in South Africa.

AFRICAN BIODIVERSITY CREDITS?

Development agencies and small project owners are driving discussion on the topic of biodiversity credits in Africa, another novel way of financing nature, Maseke said.

“Those developers who for years have been working on small projects, now all of a sudden are starting to pay attention,” she said.

“You may find some financial institutions who decide to develop the [biodiversity] credits market. Some may want to put up a biodiversity credits exchange.”

When governments drawing up nature strategies turn to private financing, they will eventually begin to work with these smaller actors on biodiversity credits, she predicted. “At some point, they’re going to converge. In some countries, they’re already converging.”

“Strong discussions” about biodiversity credits from market actors in countries including Rwanda, Ghana, Kenya, and nations around the Congo Basin are underway, she said.

“Kenya wants to go into the green economy and the bioeconomy is a key part of that. There’s a whole discussion of bioeconomies from biodiversity-rich African nations. Building a bioeconomy is the next frontier.”

However, lessons on biodiversity credits have been learned from the carbon credits market, she said. “It’s still a developing concept. It’s also coming on the backdrop of very negative press from the carbon credit side.”

“There’s still a lot of research that needs to be done in terms of, is the African market ready to go fully into it? That needs to be done fast.”

One advantage a voluntary biodiversity credits market would have over its carbon equivalent is that the former already has Indigenous Peoples and local communities at the centre, she said.

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