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The Insurance Development Forum’s (IDF) Inclusive Insurance Working Group (IIWG) is spearheading an inclusive insurance roadmap in Senegal in partnership with international organisations, local regulators, and insurance businesses.
Senegal is one of Africa’s fastest-growing countries, but in recent years its resilience has been frequently tested by a variety of shocks – both exogenous and endogenous, economic, environmental and political – which have had devastating effects on the population, particularly the most vulnerable. At the same time, less than 10% of the population is insured against risks, and around 97% of businesses are in the informal sector.
Focused on making impactful strides towards enhancing financial inclusion and driving economic resilience, this implementation update is based on the inputs collected during the inclusive insurance session organised by the IDF’s IIWG during the country workshop. The workshop was promoted by a collaboration between the United Nations Development Programme (UNDP) together with The Microinsurance Centre at Milliman (MIC@Milliman) and the World Bank Group Global Index Insurance Facility (GIIF) in Dakar, on 13th of July 2023: a partnership that embodies the shared commitment to addressing the nation’s insurance needs.
The transformative inclusive insurance session marked a key milestone in the trajectory of Senegal’s insurance landscape. This session was enriched by insights and inputs from a diverse group of over 50 stakeholders, including regulatory authorities, insurance industry representatives, development partners, and experts in the field of inclusive insurance.
Engagement and Implementation
The Strategy of the IIWG consists of establishing a Country Task Force in each focus country, bringing together the players working in the inclusive space in order to assess the gaps and opportunities and design a roadmap of activities, with a list of projects that could be supported by IDF members in order to achieve a determined level of scale.
The end objective is to support the market in increasing the uptake of inclusive insurance coverage in order to achieve the InsuResilience Global Partnership Vision 2025 of having an additional 500 million people covered by insurance protection, out of which 150 million people should be covered through inclusive insurance.
The context: Senegal
Agriculture is the main economic activity in Senegal, with nearly half of the country’s households (47%) engaging in agricultural activities such as fishing, livestock farming, rain-fed crops, flood recession crops, forestry, etc.
Droughts, floods, crop pests, and bushfires are the most common climate and environmental risks in the country, both in terms of frequency and severity of their impact on food security and community livelihoods.
The risks inherent to Senegal’s geography are exacerbated by factors related to climate change. There is already clear evidence of a decrease in rainfall and an increase in land surface temperature which will contribute to a likely shortening of the agricultural growing season by about 20% by 2050.
From a broader perspective, integrated assessment studies highlight that Africa will experience significantly greater climate change damages relative to its population and GDP compared to other global regions.
It is noteworthy that, as a prospective pathfinder country within the Global Shield against Climate Risks, Senegal would be eligible to receive pre-arranged financial support designed to be deployed quickly in the wake of climate disasters.
Identifying the gaps
The workshop served as a platform for participants to identify gaps and formulate potential strategies to amplify the uptake of inclusive insurance across the nation. Participants created a gap analysis focusing on critical areas and strategic measures to enhance insurance access and resilience among different segments of the population.
Stéphanie Soefdjede, Africa Regional Manager for the MicroInsurance Network, noted during the workshop that Senegal is a pioneer in agricultural insurance, with the segment representing 95% of premiums collected within the sample of inclusive insurance products voluntarily reported in the Landscape Study (vs. 1% and 2% for Nigeria and Burkina Faso).
As part of the CIMA region, Senegal applies the common framework for regulation of inclusive insurance since 2012, without any companies specialising in the field being set up. Six traditional insurers have nevertheless obtained an extension of their authorisation to carry out microinsurance operations, including two life insurance companies and four non-life insurance companies.: SUNU Vie, ALLIANZ Vie, AXA Assurances, ASKIA Assurances, CNAAS, and Assurances la Providence.
The main products marketed are death insurance, health insurance, individual accident insurance, property damage insurance (caused by fire, water damage, etc.),crop and livestock loss insurance.
The main distribution channels used are Microfinance Institutions, cell phone operators, associations, economic interest groups, brokers, NGOs, etc., which can distribute microinsurance products following a 48-hour training course.
Companies mainly target players in the informal sector, agriculture in the broadest sense, low-income SMEs/SMIs, the craft industry and microentrepreneurs, among others.
- The number of people insured in microinsurance rose by 13.5% between 2020 and 2021, after falling by 66.32% between 2019 and 2020
- In 2021, 36% of contracts concern life insurance, compared with 64% for property and casualty insurance, mainly contracts to cover farmers.
Regulation and Training:
Senegal operates within the CIMA region’s regulatory framework for inclusive insurance. The industry recognises regulatory challenges that, if tackled, could unlock further market opportunities to be explored by the private sector. In this regard, capacity building and training focused on global best practices and benchmarks are identified as key priorities for both regulators and industry players.
Uplifting Urban Populations and SMEs:
Senegal’s risk profile highlights opportunities for microinsurance tailored to urban populations and SMEs, including the informal sector. There is a major opportunity to close the protection gap by developing and enhancing microinsurance offerings that cater to specific risks like urban flood hazards. Subsidised climate-protection products could be introduced to cultivate an insurance culture among this demographic.
Fisheries represent a major economic activity in Senegal and fisherfolk face distinct risks that extend beyond current coverage. The impact of climate change is particularly felt in artisanal fishing. Declining stocks, reduced productivity, and biodiversity loss are already evident, while the industry is further challenged by shifting water temperatures and anticipated losses of mangrove ecosystemsTherefore, participants recognised the importance of expanding insurance for artisanal fisheries to cover a wider range of scenarios in addition to the coverage already offered by the national insurer, CNAAS, introducing health and life protection for the whole family.
The uptake of microinsurance amongst this population would require sensitisation to the risks they face and to the concept of insurance, as there is a lack of understanding about its application. An idea provided by participants of the workshop was to appoint Ambassadors within organised groups of fisherfolk such as cooperatives to promote access to information.
“Appointing ambassadors within these groups, who are fishermen like any others, simplifies and democratises the process. In fact, providing access to information breaks down the barriers associated with the complexity of insurance, making it more accessible to a broader audience.
By identifying ambassadors or representatives within smaller groups, this approach disseminates information about insurance, dispelling the perception that it’s complicated, inaccessible, or too costly. Moreover, it facilitates reaching out to SMEs and informal workers.”
– Workshop participant
Broadening Coverage for Smallholder Farmers:
The impact of climate change is already taking its toll on agricultural activity in Senegal. Agriculture is vital for the country’s economic and social endurance, serving as the primary source of income and employment for over 60% of the 16 million residents and crucial for the survival of northeastern communities from Podor to Bakel, including Matam, a border town near the desert.
In the Matam region in the north-east of the country, global warming has completely disrupted the ancestral model of rain-fed agriculture. In this part of Senegal, as in the entire Sahelian zone, rainfed agriculture is, as its name suggests, very dependent on the precipitation regime. Usually, the rainy season begins in June, the start of sorghum and millet sowing, and ends in September, harvest time. Then comes the cold dry season, the time of so-called recession crops, another traditional activity which uses the humid and fertile banks of the river after its withdrawal. But for several years, this calendar has been completely disrupted. The delayed, irregular rainfall, rising violent weather events, and unpredictable river flooding, exacerbated by the Manantali hydroelectric dam in Mali, are weakening the traditional agricultural model.
CNAAS’s coverage for agriculture could be expanded to include pasture conditions, acknowledging the need for risk mitigation in varying scenarios. There’s room for private sector involvement, introducing specialised products like cattle theft insurance and tailored health and life insurance for farmers and their families. Distribution of agricultural coverage should integrate financial assistance and risk management, facilitating banking services bundled with insurance solutions to cater to smallholder farmers’ diverse needs.
“SMEs and informal sector workers are the driving force of the Senegalese economy. We need in-depth analyses of risk coverage, particularly for catastrophic events, and how to address the vulnerabilities of those with limited access to insurance. This is the core of our consideration – creating innovative products.
Rebuilding trust between insurers and insured is essential, leading to higher enrolment and risk pooling. Establishing an insurance guide for SMEs and media campaigns can address this. The one-stop shop for business creation could serve as a gateway for SMEs to access risk coverage solutions. Communication, especially through media, could highlight the affordability of premiums, as many wrongly assume insurance is costly.”
– Workshop participant
Engagement of stakeholders
The gap analysis led to the development of a subsequent roadmap to bridge gaps in Senegal’s inclusive insurance landscape, which will complement UNDP IRFF’s recommendations for the country. At the heart of the workshop’s success was the unparalleled engagement of stakeholders representing various sectors and domains. This dynamic engagement forged an environment of collaborative thinking, idea sharing, and innovative brainstorming.
The vision of an inclusive insurance roadmap for Senegal is a testament to this engagement, encapsulating the collective expertise and insights of a wide range of contributors. The roadmap highlighted specific, actionable steps that are designed to address the unique risks posed by Senegal’s geographical location and climate vulnerabilities.
These steps encompass regulatory adjustments, specialised product development, insurance education campaigns, and fostering an insurance culture among the most at-risk groups. By translating discussions into actionable strategies, the workshop made evident the commitment to measurable, positive impacts.
Country Roadmap Highlights:
The proposed Senegal country roadmap is a culmination of the workshop’s discussions and reflections, translated into a structured plan of action across five strategic thematic areas:
Regulation and Training: A Joint Working Group is proposed to address regulatory obstacles to inclusive insurance uptake. Collaborative efforts with international organisations for training in inclusive insurance for supervisors and market practitioners are also recommended. This emphasis on regulatory alignment sets the stage for a conducive environment for inclusive insurance growth.
Insurance Education: Recognising the information gap as a major constraint, the roadmap proposes an Insurance Education Programme. The creation of insurance guides tailored for SMEs, fisherfolk and smallholder farmers and leveraging social media platforms to disseminate risk management and insurance-specific information will help bridge this gap. Insurance roadshows, in partnership with regulatory bodies, will further contribute to spreading awareness.
Urban Population and SMEs: The roadmap underscores the importance of designing microinsurance products catering to urban populations and SMEs, including the informal sector. The feasibility of credit-linked products for SMEs and the exploration of mandatory coverage for certain risks are highlighted. The roadmap also advocates for the piloting of subsidised climate-protection products, which will not only increase insurance uptake but also promote climate resilience.
Fisherfolk: In the context of fishing communities, the roadmap outlines the development of comprehensive health and life products that address the unique needs of these communities. Additionally, nature-based solutions are proposed to ensure environmental sustainability. Collaboration through a multi-stakeholder platform for product innovation ensures that these solutions are holistic and relevant.
Smallholder Farmers: Recognising the vital role of smallholder farmers in Senegal’s economy, the roadmap suggests broader insurance coverage that encompasses pasture conditions. Supplementary insurance offerings targeting challenges such as cattle theft are proposed, along with the removal of barriers to bundling insurance with financing solutions for smallholder farmers. This approach, coupled with multi-stakeholder collaboration, seeks to transform the risk landscape for farmers.
Advocacy for resilience: a bridge between vision and implementation
It became evident that the roadmap’s success hinges on advocacy and engagement efforts targeted towards regulatory authorities, insurance associations, and the general public. This advocacy aims to underscore the importance of inclusive insurance in building resilience, not just for individuals, but for entire communities and the nation at large. Advocacy acts as a bridge between the vision laid out in the roadmap and the real-world implementation required to bring about transformative change.
Other Action points / recommendations for Senegal’s Microinsurance Market::
- Tax exemption for microinsurance products (this is already the case for life insurance products), and application of a flexible tax regime for new companies dedicated exclusively to microinsurance to encourage the creation of such companies
- Popularisation of microinsurance products by insurers and brokerage firms
- Reinforcing financial education and capacity-building for the staff of these companies
- Revision of Book VII of the CIMA Code to adapt it to the requirements of microinsurance
Jennifer Phillips, Advisor at the InsuResilience Secretariat, delivered a virtual presentation on the Global Shield against Climate Risks and answered questions from the audience members during the event. Jennifer said:
“It was a pleasure to participate in the IDF’s Inclusive Insurance Working Group during the country workshop in Dakar to present on the Global Shield against Climate Risks. The main objective of the Global Shield against Climate Risks is to provide the most affected people and countries with easier and better access to Climate and Disaster Risk Finance and Insurance (CDRFI) solutions, adapted to the local context and with greater ownership by countries along the entire process. For this reason, we were happy to have the opportunity to engage in this workshop and initiate discussions on protection gaps, along with exploring how Senegal can benefit from the Global Shield.”
Workshop participant Omar Diouf, Head of the technical department at Compagnie Nationale d’Assurance Agricole du Senegal (CNAAS), said:
“We are currently facing concerns about climate change, which is increasing the risk of natural disasters, particularly affecting vulnerable populations. In managing these risks, inclusive insurance is emerging as one of the most effective tools, complementing assistance and prevention efforts. In addition, it is the responsibility of the State, in close collaboration with professional organisations, insurers and investors, to design and implement a policy to support social protection.
This initiative, encompassing both social and economic aspects, aims to guarantee the security of the population, especially those on low incomes. The aim of this approach is to reduce the exposure of people, especially the most vulnerable, by offering them insurance cover tailored to their financial resources and needs. In short, it is a solution that will significantly strengthen the resilience of these communities in the face of growing environmental challenges.
The organisation of this workshop by MiN and IDF, supported by UNDP, is a major step forward in the search for a lasting solution to such a significant problem.”
Michael J. McCord, Managing Director, MicroInsurance Centre at Milliman, IDF IIWG member, said:
“Too often in the development sector we see siloed and duplicative initiatives. Identifying linkages between donors and the public and private sectors and leveraging each other’s resources, technical skills, and networks is an efficient and effective way to maximize inclusive insurance outcomes, and I am pleased to say that this is exactly the approach the IDF’s IIWG and UNDP’s IRFF are taking in Senegal. For the joint inception workshop in Dakar held July 2023, the IIWG and the IRFF coordinated both content and logistics for the event, presenting to a multistakeholder audience pivotal for both initiatives. Going forward, the idea will be to maintain that aligned and complementary approach to implementing recommendations among the IIWG, IRFF, and insurance industry and regulator in Senegal.”
Pedro Pinheiro, the coordinator of the IDF Inclusive Insurance Working Group, said:
“The outcomes of the inclusive insurance session at the Senegal workshop encapsulate the spirit of partnership, innovation, and determination that are core values of the IDF. By convening stakeholders from various sectors and backgrounds, the workshop embodied the essence of engagement, the cornerstone of the inclusive insurance roadmap.
The roadmap itself is a testament to the power of implementation, action, impact, and advocacy – these pillars provide the framework for Senegal’s journey towards greater resilience. The commitment of all participants, including UNDP, GIIF, MIC@Milliman, speaks to our shared dedication to securing a more resilient future for Senegal.
Together, we will continue to work tirelessly to bridge the insurance gap and empower communities to withstand the challenges they face. As we move forward, let us remember that resilience knows no boundaries, and the path we forge today through collaboration, knowledge sharing and innovation, will pave the way for a brighter, more secure tomorrow.”
Note: This Implementation Update is based on the insights, discussions, and outcomes of the inclusive insurance session organised by the IDF’s IIWG during the country workshop promoted by UNDP with MIC@Milliman in Dakar, on the 13th of July 2023. It reflects the collaborative efforts of diverse stakeholders and underscores the commitment of the IDF and its partners to advance the cause of inclusive insurance in Senegal and beyond.
19th October, 2023