Why Insurance Retention Matters for Africa's Development

Countries in West Africa are using insurance regulations to keep more money on the continent, improve local capacity, and provide funds for long term investments, write Kouame Junior Kouakou and Arthur Michelino.

Every year, African countries pay billions in insurance premiums to protect themselves against disasters, accidents, and business risks. Most of that money immediately leaves the continent, flowing to reinsurance companies abroad in London, Singapore and New York. Reinsurance (essentially insurance for insurance companies) allows local insurers to share their risks with larger global firms. This stabilises local insurance companies by spreading risks across multiple markets, but it also drains resources from African economies. The money that could serve as investment capital or flows out of Africa into Europe, North America, or Asia.

In West and Central Africa, regulators have sought to address this problem through a framework designed to retain more insurance capital in the region. The Conférence Interafricaine des Marchés d’Assurances (CIMA), a regional regulatory body covering 14 countries, established rules requiring insurers to maintain at least half of their business within the zone and to place a portion of some risks with CICA-Re, a regional reinsurer jointly owned by member states.

CICA-Re reported revenue of about £182 million in 2024, an increase of about 16 per cent over 2023. The company’s reserves are typically invested in sovereign bonds and long-term assets, providing patient capital for African economies. In countries with shallow domestic capital markets, having this regional capacity and these reserves, built through mandatory contributions, provides important fiscal and financial cushions. The strength of CICA-Re’s recent performance suggests that the regulatory model is working. Risk retention has moved from being purely voluntary towards a structured, legally mandated practice.

Building expertise alongside capital

Local retention does more than accumulate reserves. When insurers cannot simply transfer risks abroad, they must invest in the capabilities required to assess, price, and manage those risks locally. This creates demand for professional skills (actuarial expertise, risk assessment, claims management). Regulatory requirements make technical weaknesses more visible and more urgent to address. Over time, improvements in these areas prove as important as the capital retained, because they build foundational skills required for sustainable market growth.

The framework also expands the pool of financial flows subject to local taxation and oversight, offering states incremental resources alongside stronger regulatory leverage. This matters beyond revenue collection. Stronger regulatory capacity enables more effective supervision of market conduct, better consumer protection, and greater coordination of insurance policy with broader development objectives. In economies with narrow tax bases and weak institutional capacity, even incremental gains in fiscal resources and regulatory authority contribute meaningfully to state capability.

From local retention to financial sovereignty

By making retention a structural obligation rather than a commercial choice, CIMA member states prevent the automatic outflow of premiums. This is regulation as development strategy, using legal authority to pursue financial sovereignty.

This mechanism has several consequences. It nurtures technical capacity by requiring insurers and regulators to engage directly with the risks they cover rather than outsourcing responsibility. It generates reserves that governments and firms can mobilise for national development priorities, from infrastructure finance to the expansion of local capital markets. It also affirms sovereignty by reducing dependence on international reinsurers and strengthening the bargaining position of African institutions when engaging with global markets. The rules ensuring that at least part of the risk-capital cycle remains anchored in the region make this possible.

Many African economies continue to rely heavily on external sources of capital, including aid, concessional loans, and foreign direct investment. Insurance premiums, by contrast, are generated domestically and represent one of the few stable sources of capital arising from within African markets themselves. When these funds flow abroad without restriction, the opportunity to use locally generated resources for domestic purposes is diminished. The CIMA framework moderates this dynamic by ensuring that a portion of premiums remains within the region and circulates through its financial systems.

Development policy typically focuses on attracting external inflows, including aid, investment, and concessional finance. The CIMA model demonstrates that managing what already exists matters just as much. By structuring financial systems to retain value, states can build internal capacity and reduce their exposure to volatile international markets. Insurance, seen this way, is not only about risk management but also about domestic resource mobilisation.

Major catastrophic risks will, however, continue to require global reinsurance capacity, and uneven data complicates pricing. But the strategic value of the regulatory architecture lies precisely in defining where regional retention is viable and where international capacity remains necessary. The existence of this framework demonstrates that financial regulation can be designed as a development tool, balancing the need for international capacity with the imperative of regional retention.

If CICA-Re accumulates significant reserves through mandatory contributions, it becomes an anchor investor in African capital markets. The reinvestment of insurance reserves into sovereign bonds, infrastructure projects, and even regional development banks can reinforce financial sovereignty whilst supporting long-term growth. The CIMA experiment is not just about technical regulation but about reshaping the region’s position in global finance.

From regulation to development

Local retention in the CIMA zone represents a deliberate instrument of development and sovereignty. By obliging insurers to keep part of their risks within the region, West and Central African states have created a system that mobilises capital, builds technical expertise, strengthens fiscal revenues, and keeps financial flows anchored locally.

Other sectors face similar dynamics, including capital generated locally but captured externally through licensing fees, profit repatriation, or debt service. The CIMA model suggests a response, using regulation to retain and redeploy resources already circulating within domestic systems. Development is not only about new inflows of capital. It is also about retaining and deploying resources that have already been generated within those systems.

For policymakers in Africa and elsewhere, this experience offers a useful precedent. Retention rules do not imply closing the door to international markets. They imply engaging with them from a stronger position, where local capacity and capital provide a foundation for negotiation. Other regions grappling with capital flight and financial dependency may find in the CIMA framework a model worth adapting, a way to align financial governance with both developmental outcomes and the pursuit of sovereignty.