Fortune News | Jan 11,2020
Sep 27 , 2020
By Asseged G. Medhin ( Asseged G.Medhin, deputy CEO of Global Insurance Company. )
Putting in place an insurance industry able to protect against not just operating risks, but acts of God, is urgently needed. It leaves governments, including Ethiopia, with no other choice but to attempt to push forward to ensure economic dynamism, writes Asseged G.Medhin, deputy CEO of Global Insurance Company.
In as far as humans have existed, they have faced risks to their lives and the resources they depend on for survival. What is more, every journey, metaphorical or literal, has required taking on some risks. The more the possibility of hedging these risks, thus, the more likely one will take them.
This is why merchants and sailors are willing to traverse the high seas, braving adverse weather conditions and sea perils, to trade. Together with the availability for insuring one's property, the appetite to trade grew side-by-side. Once the Europeans began developing it, and its importance to realising competitiveness was recognised, there have been leaps and bounds in the development of modern insurance and risk management theories, principles and philosophies.
Ferdinand Magellan might have faced the sea perils with no possible protection from financial loss, but since Edward Lloyd opened a coffee house where merchants were willing to underwrite one another, the world has not been the same.
The importance of insurance is re-asserting itself in 2020. Act of god accidents, from wildfires to tornadoes, and human-made disasters, including arguably the Novel Coronavirus (COVID-19) pandemic, have been the main news of the year. We are now seeing a unique and turbulent time for insurers everywhere as a matter of the magnitude of impact and complexity of such risks. Insurers may, therefore, find themselves in a state of bewilderment and immersed in a dilemma on how this much can be insured.
But governments often find it to their advantage to ensure that their citizens are protected from loss during such times. This is why, in most of the world, health insurance is popular. People are willing to pay not just through their wallets to be insured but through the ballot box as well.
Unfortunately, putting in place an insurance industry able to protect not just operating risks, but acts of God, is easier said than done. Still, it leaves governments, including Ethiopia, with no other choice but to attempt to do as such.
The problem has been brought to the forefront recently by the flooding that is occurring in several parts of the country. Having led to the displacement of one million people and loss of property, its economic impact can only be mitigated through tailor-made insurance policies. This can be done through partnerships between the industry and the government.
Given that global weather conditions are predicted to get worse, this is a conversation that needs to be had. In more developed countries, it would be part of the national discourse. Politicians would argue and develop policy strategies on how such disasters could be insured and losses are protected.
Why can we not be doing this in Ethiopia? How is it possible that COVID-19 has not inspired a heated debate on the state of health insurance in Ethiopia, especially given how medical treatment has become prohibitively expensive these days?
Just as in need of discussions is the loss of life and property we witnessed as a result of political violence in various parts of the country. This is another risk that has become deeply perceptible in Ethiopia and that business would want to be protected against. Indeed, with strategic risk hedging, the financial losses can be compensated through a political and terrorism risk insurance policy.
What should be the response for this and other emerging risks? Should we insure them or not? If yes, at what price? What is the public’s perception of this? Whose responsibility is it?
These have to be answered with a sense of urgency. Both the government and insurance firms must learn from health-related risks after COVID-19, investing further in life and health insurance, as well as orienting focus toward coverage of natural disasters and political violence.
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.
PUBLISHED ON Sep 27,2020 [ VOL 21 , NO 1065]
Fortune News | Jan 11,2020
Radar | Apr 20,2019
Commentaries | Mar 11,2023
Editorial | May 28,2022
Agenda | Jul 11,2021
Fortune News | Apr 06,2019
Fortune News | Jun 10,2023
Commentaries | Jul 10,2021
Viewpoints | Oct 26,2019
Commentaries | Oct 24,2020
Photo Gallery | 77743 Views | May 06,2019
Photo Gallery | 69761 Views | Apr 26,2019
Fortune News | 56172 Views | Jul 18,2020
Fineline | 55312 Views | Oct 03,2020
Commentaries | Sep 30,2023
Life Matters | Sep 30,2023
My Opinion | Sep 30,2023
Sunday with Eden | Sep 30,2023
Agenda | Sep 30,2023
Editorial | Sep 30,2023
Dec 24 , 2022
Biniam Mikru heads the department of cabinet affairs under Mayor Adanech Abiebie. But...
Jul 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
Nov 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
Nov 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
The average debt ratio in sub-Saharan Africa has almost doubled in just a decade - fr...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country's most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or two...
Sep 30 , 2023
The recent gathering by the leadership - and the rank and file - of the Prosperity Pa...
Sep 23 , 2023
Ethiopia's contemporary political leaders and the policy wonks under their command ha...
Sep 16 , 2023
The Ethiopian economic narrative oscillates between pockets of resilience and signifi...
Sep 10 , 2023
Earlier this Ethiopian fiscal year, the heralding of a peace deal became synonymous w...
In a world where resilience and love are often tried and tested, Salem Getachew's (MD) luminous spirit stands as a testament to the enduring...
It is fascinating to witness the power of technology in bridging the gap between individuals. However, I can not help but wonder if the surg...
Sep 30 , 2023
A staple vegetable's price is ringing alarm bells. Onion prices have skyrocketed, with a kilo costing up to 120 Br on certain days. For man...
Sep 30 , 2023 . By BERSABEH GEBRE
A vital shift is on the horizon for Ethiopia's manufacturers, who once thrived on exports braced by the A...
Sep 30 , 2023 . By BERSABEH GEBRE
In a move rattling the coffee industry, officials of the Ethiopian Coffee & Tea Authority have impose...
Sep 30 , 2023 . By MUNIR SHEMSU
Applying advanced reproductive biotechnology to dairy cattle is indicated as a way to rectify the underwh...
Or see contact page