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The potential of remittance-linked insurance products in sub-Saharan Africa

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Remittances are particularly important serve as a lifeline to many households. Yet insurance products that enable the sustained flow of remittances or the resilience of senders and receivers remain unexplored in sub-Saharan Africa(SSA).  Both remittance senders and receivers face unexpected risk events that have negative effects on their livelihoods, they often do not employ appropriate coping mechanisms to manage the risk events. 

Distributing insurance through remittance service providers (RSPs), e.g. remittance-linked insurance products, has the potential to build resilience by unlocking greater formal remittance flows to SSA, as well as by increasing insurance uptake to help close the risk protection gap. Transferring risk to an insurer will enable the continued flow of remittances despite senders facing a risk event. Consequently, the welfare of the remittance receivers, who are often highly dependent on remittances for their livelihoods, is protected by ensuring that remittance flows are sustained despite risk events faced by senders. Insurance can also help to smooth the financial burden on senders when remittance receivers incur a shock and require senders to help tide them over. 

This note outlines why remittance-linked insurance products are important, what forms they could take, the business case for such products and the regulatory challenges that still need to be overcome to enable the introduction of such products on the continent.  

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