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Reports, Index Insurance, Global | 2021

Index Insurance: 2020 Status and Regulatory Challenges

In recent years, significant developments have been seen in index-based insurance. Good results are stemming from innovative and more accurate indices - jurisdictions are better adapting business models and distribution channels to their needs.

’Index Insurance: 2020 Status and Regulatory Challenges’ provides an overview of how the supervisors have been dealing with the challenges related to index-based insurance during the last years, as well as insights from the industry side, especially in emerging markets and developing economies. It is based on the results of the 2020 index insurance survey, where the A2ii received comprehensive responses from insurance supervisors from 27 different countries, as well as from industry representatives.

In this update of the 2018 report on the same topic, issues such as the one of the recognition of index insurance within the insurance legal and regulatory frameworks remains a challenge for jurisdictions.

However, various approaches to the recognition of index-based risk transfer contracts as “insurance” have unlocked opportunities to develop the market and promote access to insurance.

The regulatory approaches observed in the survey broadly fell into the following three categories:

  1. The adoption of specific index insurance laws and/or regulations providing legal certainty for index insurance. Argentina, Puerto Rico and Uganda are examples of jurisdictions that have chosen to regulate index insurance in the last five years.
  2. The issuance of a legal opinion in favour of including index products under insurance law, based on the "insurable interest" at the date of contracting. Costa Rica and Brazil are examples of countries that adopted this approach.
  3. The adoption of a pilot project, usually in the context of a regulatory sandbox, as an exception to existing law, as in Kenya.

One of the findings to support supervisors is that a new regulation is not necessarily the only way - there are other approaches to enable index-based insurance. To view some examples of regulation, visit our Interactive Inclusive Insurance World Map