Insurers should work together in devising risk management programmes, mitigation strategies, building up the national re-insurer (Ethio Reinsurance), and advising the government on creating risk and disaster recovery programmes.
Fortunately, the government has been active in reforming the financial industry. Financial inclusion efforts, interest-free insurance, empowering Ethiopian Reinsurance, and green lighting micro-insurance companies have been important moves in the attempt to move forward.
Such reforms are critical for a world that is in shock due to the pandemic and natural disasters such as droughts, wildfires and floods. The insurance industry should thus take the role in developing a strategy, based on the National Bank of Ethiopia’s (NBE) guidelines, to find ways to respond to mega risks.
Risk mitigation is not just a way of protecting certain individuals and businesses from financial ruin. It has positive externalities across the economy and is critical to underwriting competitiveness and innovation.
Without a strong insurance industry, a modern economy cannot function. Its lack constitutes a missing link that will lead to businesses and individuals being wary of taking even the slightest of risks. It is not a choice to put it in place. It is a matter of economic survival.