Regulatory frameworks generally refer to the special license as a license for microinsurance. CGAP has adopted the use of the term “inclusive insurance” rather than microinsurance. Throughout this blog, when we refer to the standalone license, we mean the license for a microinsurer. When we refer to inclusive insurance, this can be used interchangeably with microinsurance.
Many insurance authorities are exploring dedicated (standalone) licenses as one way to expand access to insurance for low-income and underserved populations. The idea is straightforward: by creating a proportionate regulatory regime for standalone providers, authorities hope to encourage entities—such as microfinance institutions, mutuals, community-based insurers, international insurers, or specialized firms — to enter markets that conventional insurers have often neglected.
Over the past two decades, more than 30 jurisdictions—mostly in Sub-Saharan Africa—have introduced licensing frameworks for standalone insurers, often alongside rules that allow conventional insurers to offer inclusive insurance through specialized business lines.
However, while standalone licenses can lower barriers to entry, they also introduce new supervisory and market design challenges. Authorities must balance flexibility with consumer protection and ensure that a special regime attracts investors’ interest and genuinely supports sustainable inclusion rather than creating fragmentation, unfair competition, or a license type that is not accepted in the insurance market.
Insurance authorities are now taking a closer look at emerging lessons.
Why do insurance authorities consider this approach?
A standalone, proportionate license is a way to signal policy intent and create a clear path and incentives for new dedicated inclusive insurance providers. The requirements for these companies or mutuals are relative to the risk and size of the business. In practice, it should complement the regulatory framework for conventional insurers offering inclusive insurance as a business line rather than replace it.
Notably, the 33 jurisdictions that adopted a standalone license framework also have regulations for the inclusive insurance business line of conventional insurers. There is only one exception – Kenya does not allow conventional insurers to transact microinsurance anymore; they need to establish a separate company for this purpose.
Several challenges are associated with standalone licenses
Insurance authorities from multiple jurisdictions have been discussing the challenges of the dedicated inclusive insurance license in Supervisory Learning Circles (peer-to-peer exchanges among insurance supervisors) facilitated by CGAP through A2ii, which it now convenes. We’ve highlighted some of the primary challenges below.
1. Getting proportionality right without undermining consumer protection
Standalone providers typically offer low-cost, high-volume products with simplified structures for the low-income segment. This justifies lighter requirements for minimum capital and solvency, among others, compared to conventional insurers.
In practice, however, supervisors often struggle to determine how far proportionality should go. Capital requirements illustrate the dilemma: set them too high, and small or community-based providers are excluded; set them too low, and supervisors may worry about solvency and consumer protection.
Similar tensions arise in areas such as requiring no or less actuarial valuation, a less frequent reporting intensity, and lighter requirements for committees and key personnel, which have been implemented by a few jurisdictions. This may be pertinent for providers only allowed to offer products with smaller risk.
2. Ensuring a level playing field between dedicated providers and conventional insurers
Another challenge is fairness. In most markets, inclusive insurance is offered both by entities operating under a standalone license and by conventional insurers using a business line approach. If rules are not well aligned, one model may gain an unintended advantage through lighter requirements.
Supervisors therefore face ongoing calibration challenges: ensuring that requirements reflect differences in business models and risk profiles, while avoiding regulatory arbitrage or disincentives for either provider type.
3. Limited market uptake
In several jurisdictions, the introduction of a standalone license has not translated into strong market uptake. Some authorities have adopted this new legal framework but seen limited interest from potential applicants—ranging from local funeral parlors and community-based organizations to global insurers. This lack of interest may point to misaligned regulatory requirements, weak commercial incentives, or uncertainty about supervisory expectations, raising questions about whether the license framework comes with sufficient clarity and incentives.
Moreover, even where standalone providers do enter the market, commercial sustainability can remain a challenge. For some standalone providers, especially those operating under a capped sum insured, it is difficult to cover fixed costs when caps are set at very low levels. While such legal limits aim to protect consumers and preserve the “micro” nature of the products, they can constrain pricing, risk pooling, and product viability if not calibrated carefully.
Despite the challenges, there are promising examples to build on
The Philippines demonstrates that a standalone license can work when it is embedded in a broader ecosystem. The success of the country’s 27 Microinsurance Mutual Benefit Associations (MiMBAs) reflects two key factors:
- MiMBAs are member-owned and linked to microfinance institutions (MFIs) as community organizations, which helped overcome trust, affordability, and distribution barriers.
- The regulatory framework – introduced in 2006 and refined over time – built on an ongoing dialogue between the Insurance Commission and the sector.
As a result, MiMBAs now reach almost 30 million low-income Filipinos with life insurance products. In addition, partnership models are filling gaps where these mutuals cannot underwrite certain risks in the non-life space directly.
Positive examples don’t stop with the Philippines. Nepal, Nigeria, Rwanda, South Africa, Uganda, and Zimbabwe have also licensed a significant number of standalone companies, and they are active providers in the market, providing both life- and non-life coverages to millions. These countries are now looking closer to find out what works and what they can change to ensure traction in the market.
What are some key considerations for implementing a standalone license?
Standalone licenses can be a powerful policy tool under the right conditions. Insurance authorities – when considering or amending this approach – should ask the following questions:
- Are there candidates that would apply for a license, such as MFIs, local communities, technology providers, or international insurers that have the networks to serve low-income communities?
- Apart from companies, can the legal form of member-based organizations, such as mutuals, be considered to encourage local communities and cooperatives, like in the Philippines?
- Are critical elements of inclusive insurance, such as alternative distribution and partnerships, digital technologies, and quality products, sufficiently embedded in the new legal framework?
A final consideration when implementing a standalone license is the need for a robust monitoring framework. Authorities should track progress and impact from the start using clear performance indicators, including outreach and usage data, as well as measures of client value, to identify bottlenecks affecting sustainability and client outcomes.
Experience suggests that standalone licenses can be effective when embedded in a broader inclusion strategy, linked to trusted distribution channels, supported by available and analyzed performance data, and adjusted over time based on market feedback—rather than treated as a silver bullet for expanding insurance access.
