Interview: Mohamed Aden
What are the main economic indicators driving investment in insurance, and which lines of coverage are experiencing the strongest growth?
MOHAMED ADEN: Following a recovery in 2021, economic activity slowed in 2022. This downturn was attributed to disruptions in global shipping and logistics chains related to Russia’s ongoing invasion of Ukraine, low demand in Ethiopia, and severe drought. However, macroeconomic indicators in Djibouti remain strong. GDP growth remained moderate in 2022, down to an estimated 2.5% from 4.8% the previous year, but this is expected to accelerate to 4% in 2023 and 6% in 2024, thanks to ongoing infrastructure projects.
Djibouti’s economy is expected to recover gradually in the medium term, supported by investment programmes driven by the private sector and government-owned enterprises, as well as structural reforms to be undertaken as part of the implementation of Djibouti’s second five-year development framework, National Development Plan 2020-24, also known as Djibouti ICI. Facilitating this expansion is the loss ratio, which is below 50% and could help encourage investment. These indicators suggest growth in several segments, including non-life, home, provident and mutual health insurance. Moreover, one notable trend is that car insurance uptake has been increasing.
In what direction is the market penetration rate moving, and what can be done to increase it further?
ADEN: The penetration rate, which measures the contribution of the sector to the economy has, in general, followed the same pattern as insurance density. Since 2013 the overall market, and especially the automotive segment, has seen a continuous increase in the penetration rate. Going forwards, there will be opportunities to improve this indicator significantly.
Three key factors can substantially increase the insurance penetration rate. First, the market may see a significant boost by improving the claims experience for policyholders and accident victims. Second, innovation can attract more consumers with simple, accessible and transparent products. Lastly, additional compulsory coverage instituted to address specific liabilities may increase demand. This is already happening with construction insurance in Côte d’Ivoire, but the law has yet to have the expected effect – particularly in terms of sufficient coverage for all construction sites.
How do you perceive the regulatory framework for the insurance sector in Djibouti?
ADEN: The regulatory framework is tailored to the local market since it is based on the code of the Inter-African Conference on Insurance Markets. Given the flexibility of legal procedures, we believe that the legislative framework, both in terms of taxation and standards, is cohesive and adapted to the unique characteristics and needs of policyholders.
To what extent can governments support the private sector’s efforts to expand health coverage?
ADEN: It is important that the public authorities become more involved in facilitating insurance coverage for their citizens by establishing a national health policy, and regulating private insurance and medical care, while leaving the delivery of health services to the private sector. Another approach would be for private insurance companies to facilitate or complement existing public insurance systems. For instance, the Mauritanian government can contract or partner with private providers to ensure patients can use government insurance schemes.
Private providers already play a significant role across all income levels in sub-Saharan Africa’s health systems. Such organisations can also contribute to enhancing universal health coverage by offering quality products and services that consider the needs of all people – including poor and marginalised populations – and making these products and services more affordable.
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