The Case for Insurance Innovators to Consider the Cell Captive Regulatory Model

In many African countries, the potential for inclusive insurance markets is significant, however, this potential has yet to be fully realized. High entry barriers for new innovative players and regulation that may not effectively accommodate them are important contributing factors.

Innovators such as insurtechs operating in these markets are often hamstrung by a finite set of regulatory license options available to them, usually limited to an agent, broker or full insurance license. Agent or broker distribution licenses usually have lower compliance requirements than insurance licenses, but they are also narrow in the activities permitted. On the other hand, start-up innovators may not be able to comply with the requirements, or have the capital, for an insurance license, even a microinsurance license. This constrains their role in the insurance value chain. To overcome these challenges, one possible option for smaller, innovative insurance players in sub-Saharan Africa (SSA) may be cell captive insurance, a relatively new concept in SSA that could potentially play an important role in the development of insurance markets in the region.

This work articulates the case for cell captives compared to other options available for insurance market participation, from the perspective of a prospective cell owner. It outlines existing cell captive models, unpacks the market challenges facing smaller players and presents the key considerations for operating in a cell captive structure.