Africa’s insurance challenge is increasingly becoming a question of how to make households, businesses and public infrastructure insurable at scale, rather than simply how to increase the number of people buying insurance, according to the Insurance Development Forum (IDF).
The IDF said insurance penetration across sub-Saharan Africa remains at approximately 2.7 percent, while more than 80 percent of economic losses from natural disasters remain uninsured, leaving governments, households and businesses to shoulder much of the financial burden when floods, droughts and storms occur.
The scale of the challenge was also highlighted at the just-concluded inaugural Climate and Disaster Risk Financing and Insurance (CDRFI) Africa Forum in Nairobi, where participants said only about 3–5 percent of disaster losses in Africa are currently covered by insurance. Governments therefore absorb more than 90 percent of losses estimated at between $7 billion and $15 billion annually.
Against this backdrop, the IDF is calling for greater attention to the conditions that make insurance possible and scalable, rather than focusing only on expanding conventional coverage.
Ekhosuehi Iyahen, secretary-general of the IDF, and Hope Murera, managing director and group CEO of ZEP-RE (PTA Reinsurance Company), made the case in a September 15 article, arguing that Africa’s resilience challenge is not simply the absence of insurance, but the absence of “insurability at scale”.
They argued that the distinction is becoming more important as climate risks become increasingly predictable while financial protection remains limited.
“When floods, droughts or storms strike, recovery is too often financed through public borrowing, depleted household assets and delayed investment in development priorities,” they said.
According to the authors, the issue has moved beyond the insurance sector into questions of economic resilience, fiscal stability and sustainable development, particularly as climate volatility increases and development finance becomes more constrained.
They said many risks traditionally described as “uninsurable” should instead be viewed as “underserved”, shifting attention towards the conditions required to make insurance commercially and operationally viable.
These conditions include better risk data, stronger regulation, affordable distribution, appropriate capital and delivery systems capable of reaching large populations.
The authors pointed to the World Bank-funded DRIVE project, implemented by ZEP-RE, as an example of how these conditions can expand access to climate protection. The drought insurance programme has reached more than 3.5 million pastoralists and their dependants across four countries in the Horn of Africa, demonstrating how insurance can be extended to populations previously excluded from formal climate protection.
The experience, they said, shows that insurability is not simply something that exists or does not exist, but can be built through the combination of underwriting, digital distribution, affordability, financial inclusion and long-term partnerships.
The argument also extends to public infrastructure, which the authors said has received less attention in discussions about Africa’s protection gap.
Roads, hospitals, schools, water systems and energy infrastructure represent some of the continent’s largest uninsured exposures. Damage to such assets can create costs that go beyond reconstruction, disrupting public services, reducing productivity and putting additional pressure on government finances.
“Every uninsured bridge or power facility becomes a contingent liability on a national balance sheet,” the authors said.
They argued that protecting such infrastructure should therefore be viewed as part of development planning rather than as a financing exercise that begins only after a disaster has occurred.
The IDF and ZEP-RE said four areas would be critical to expanding insurability across African markets: better data, harmonised regulation, patient capital and delivery at scale.
Reliable, locally generated climate and risk data can improve underwriting and pricing while supporting the development of parametric insurance products and other risk-transfer mechanisms.
The authors also called for greater regulatory harmonisation across Africa’s 54 jurisdictions, arguing that fragmented regulatory systems can make it more difficult and expensive for insurers and reinsurers to scale products across borders.
They identified blended finance and catalytic capital as important for climate resilience projects because some emerging markets require investment horizons that extend beyond conventional commercial cycles.
However, they said the larger challenge is moving proven solutions beyond pilot projects.
“The greatest deficit is no longer technical knowledge – it is implementation,” the authors said, calling for governments, regulators, insurers, reinsurers, technology providers and development institutions to align around delivery mechanisms capable of reaching millions rather than thousands.
Nigeria provides one example of the type of approach being advocated.
The authors cited Lagos State’s innovative flood-risk financing project, which is designed to strengthen the resilience of more than four million people exposed to recurring urban floods.
The initiative is based on parametric flood insurance, a form of cover that can provide funds when predefined conditions linked to a disaster are met, rather than relying solely on conventional claims assessment after losses have occurred.
Lagos activated a $7.5 million parametric flood insurance cover in March to provide financial protection against severe flooding, marking an effort to establish financing before a disaster occurs rather than relying entirely on emergency expenditure afterwards.
The Lagos example is part of a wider pattern identified by the IDF, alongside drought insurance linked to pastoral communities in East Africa and initiatives in Kenya that combine risk analytics, risk reduction and insurance to protect critical infrastructure.
The authors said these initiatives point to the importance of partnerships between governments, insurers, reinsurers, development institutions and technology providers in expanding insurance beyond traditional markets.
They also warned that innovation alone will not close Africa’s protection gap.
Parametric insurance, embedded insurance, satellite analytics, mobile distribution and artificial intelligence are expanding what insurers can offer, but the next phase of market development will depend on whether existing solutions can be deployed across countries, sectors and populations.
That, they said, will require stronger cooperation between insurance regulators and finance ministries, greater investment in public risk data and the integration of disaster-risk financing into national fiscal planning.
For Africa, the shift from measuring the size of the protection gap to building insurability could therefore reshape how governments approach climate and disaster risks.
The authors said the ambition over the next decade should be to double the number of people and enterprises covered by insurance and increase the proportion of public assets adequately protected across the continent.
They argued that achieving that target would give practical meaning to resilience by making financial protection a more integral part of Africa’s economic development.
