Reinsurance as a Strategic Governance Tool: Enhancing Risk Resilience in Africa’s Insurance Sector
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The role of reinsurance in shaping strategic decision-making at the board level is often underappreciated in traditional corporate governance frameworks. While reinsurance is commonly viewed as a technical transaction designed to mitigate risk, its strategic potential in facilitating growth, enhancing operational efficiency, and optimizing capital allocation is increasingly recognized. This literature review explores the theoretical underpinnings of reinsurance from risk transfer, agency theory, transaction cost economics, and enterprise risk management perspectives, while also highlighting its broader strategic role within global insurance and reinsurance markets. The review synthesizes academic insights and industry practices, demonstrating how reinsurance can be leveraged as a vital strategic asset to drive competitive advantage, ensure regulatory compliance, and align with sustainability objectives. Key governance challenges, including reinsurance literacy gaps at the board level, the impact of digital transformation, and the evolving regulatory landscape, are critically examined. Finally, the review identifies the need for enhanced executive understanding of reinsurance to navigate the complex and fast-changing landscape of risk management and capital optimization.
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