P&C Reinsurance managing director Boas Manzvera says the Zimbabwe market needs to consider raising pools of finance for weather-related events owing to the increased frequency of such phenomena.
Climatic shocks are beginning to be experienced more frequently, with the current year seeing southern Africa experiencing its worst drought ever as a result of the El Niño phenomenon.
Speaking at last week’s Insurance Institute of Zimbabwe Winter School, Manzvera said insurance pools were used as a way of providing high risk insurance exposures such as catastrophes.
Insurance pools are important, the executive added, because previously, catastrophes were not ordinarily covered, thus making them a huge opportunity to increase insurance offerings and thus drive the penetration rate for the industry.
“The Zimbabwean market needs to consider pools against weather-related covers, say around the tobacco industry value chain for example. Through pools, catastrophes not ordinarily covered will be covered, thus driving insurance penetration rates,” Manzvera said.
“Insurance pools refer to a gathering of insurance companies for a specific risk exposure, usually when a financial risk is too high for a single company to take on and can only be addressed through shared resources. Pools allow for spread of risks.”
He said pools removed duplications more efficiently and were very effective in managing exposures such as drought and floods as coverage becomes standardised.
“They are also an easy platform for private public partnerships, via pool managers. In essence, insurance becomes affordable,” Manzvera said.
Pools enables access to reinsurance markets with bargaining power, pooling of resources and the spread of risks.
He added that pools aided in attracting attention of governments and multilateral institutions such as the International Monetary Fund, African Development Bank and the World Bank as well as enhanced technical expertise.
Manzvera said the market could leverage reinsurance to cover catastrophe exposures, in the context of risk management regarding insurance.
