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Ten leadership questions for Lesley Ndlovu, CEO, African Risk Capacity Ltd

Ten leadership questions for Lesley Ndlovu, CEO, African Risk Capacity Ltd
26-04-23 / Shelly Nxumalo

Ten leadership questions for Lesley Ndlovu, CEO, African Risk Capacity Ltd

Mr. Lindelwe Lesley Ndlovu is the Chief Executive Officer of African Risk Capacity Ltd (ARC Ltd), a specialist Agency of the African Union, and Africa's leading climate insurance company. He has extensive international experience spanning 15 years across corporate finance, audit, tax advisory, insurance and investment management sectors in several countries including Bermuda, Singapore, France, and the United Kingdom.

Ndlovu is a graduate of the University of Oxford in England, INSEAD Business School in France. He is a CFA charter holder, a member of the Institute of Chartered Accountants of England & Wales and a member of the Institute of Directors.

1. For how long have you been with African Risk Capacity Group?

I was appointed as the CEO of the African Risk Capacity in March 2020 which was right at the start of the COVID pandemic. I was only in the office for one week before the lock down and we then spent the next year working remotely. 

2. How did you find the transition from leading a fully commercial concern like AXA, to leading an AU agency whose sole mandate is to assist African governments improve their capacities to prepare and respond to extreme weather events and natural disasters? ... highlights?

ARC is a unique public-private specialist insurance company set up in 2012 under the auspices of the African Union to provide insurance cover to African countries for natural catastrophes such as droughts, tropical cyclones, and floods. The main entry point for ARC is via the government since the adoption of insurance requires political willingness. The buy-in from the governments ensures that the solutions are adopted at scale.

However, dealing with governments requires a patient approach of systematically mapping out all the concerned stakeholders, usually (i) the Ministry of Finance which is responsible for paying insurance premiums and financing any responses to natural disasters, (ii) Ministry of Agriculture which has the expertise on forecasting crop yields, (iii) Ministry of the Interior which co-ordinates and manages responses to major natural disasters and (iv) Parliamentarians who vote on the budget and appropriation of expenditure.

3. How has your finance background sharpened your skills and prepared you for this role?

I often say that I got into the insurance industry via the side door. I started out my career as a Chartered Accountant and I was drawn into the world of investments due to its fast pace and intellectual rigour – you have a thesis about valuation in the market, you express your view by taking a position and the market gives you feedback through whether your idea makes money or not.

After working in investments for some time, I was headhunted to become the Chief Investment Officer of AXA in Singapore, and I later became a Chief Financial Officer and eventually the Chief Executive Officer of the insurance company in Paris and London.

Having a financial background makes me more attuned to the performance of the business in terms of revenues, profitability and return on equity. It enables quantitative, and therefore, consistent decision making. To quote Galileo Galilei "Mathematics is the language with which God has written the universe".

4. What would you say are the top qualities for effective leadership in in your current role?

I strongly believe in purpose driven leadership; we have a unique mandate to improve people's lives by offering them protection against the impact of climate change. This is at the core of my leadership and anchors the decisions I make. The team I lead at ARC is extremely talented and committed and fully convinced about purpose driven leadership.

5. What would you say are your Company's top priority areas for the next year?

  • Growth

The bedrock of insurance is scale and diversification - scale means consistently generating enough revenues to pay all the insurance claims and administrative expenses. Our strategy for growth is to introduce new innovative products such as coverage for floods, building on the successful recent launch of the tropical cyclone, as well as the outbreaks and epidemics cover.  

The need for insurance is massive given the increasing frequency and severity of natural disasters. A good example is Madagascar, which has been buffeted by intense tropical cyclones and droughts for three years in a row. We currently cover about 30 million people per year with our insurance programmes. However, there are 700 million people whose economic activities can be disrupted by extreme weather events.

  • Capital

We are raising US$100 to $200 million in additional capital to (i) improve our credit rating from BBB+ to A, which will make us the highest rated insurance company in Africa, (ii) support our growth into new countries and covering new perils, and (iii) increase our level of risk retention in a hardening reinsurance market, where reinsurance costs are up 20% to 30%. Increasing our retention is key to cushioning our clients from the steep price increases.

6. As a leading sovereign disaster risk solutions agency in Africa, and an arm of the AU, how do you attract and retain talent?

Our work at ARC is pioneering, innovative, and impactful, this attracts a large number of talented Africans in the diaspora looking to contribute their knowledge, skills, and experience to the development of the continent. In addition, ARC Ltd is the highest rated insurance entity for ESG. We have managed to hire extremely talented people who are attracted to our mission and mandate.

We retain talent by offering our staff interesting work, a great deal of autonomy in the discharge of their functions and the opportunity to advance in their careers. ARC is currently location agnostic and have staff working from all over the world – for as long as they do their work - they can be based wherever they wish.

7. How do you see technology playing a bigger part in risk management and insurance, and how risk solutions and insurance products are developed and distributed in the future?

We offer parametric insurance which pays out insurance claims based on a modelled expected loss, the major advantages of parametric insurance are that we pay claims very quickly as we do not have to go through the lengthy loss adjustment process - there are no claim forms as we model the loss and pay the claim - it is that simple. Secondly our products are hyper scalable, we can develop a product for any location in the world, for as long as we have access to the data. 

API Integration: APIs can enable insurance providers to integrate with third-party data sources, such as weather services, traffic databases, and other sources of real-time data. This can help insurers to better assess the risks of potential events and more accurately calculate the payout necessary.

Data Analytics: Parametric insurance relies heavily on accurate data analysis. As such, technological advancements in data analytics, such as machine learning, artificial intelligence, and predictive analytics, can help insurance providers better understand the risk of certain events occurring and more accurately predict the payout necessary.

Our business model is a Business-to-Business model as we only provide insurance to governments and humanitarian agencies, this gives us scale from a few key business relationships. In the retail market for micro and meso insurance, we provide reinsurance to a network of local insurance companies all over Africa. 

Smart Contracts: Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. With parametric insurance, smart contracts can automate the payout process, enabling policyholders to receive compensation immediately after a qualifying event occurs.

Blockchain Technology: Blockchain technology can be used to provide a secure and transparent way to store and share data related to parametric insurance policies, including the parameters and payout amounts. This can help to reduce the likelihood of fraud and increase trust in the insurance industry.

Overall, as technology continues to evolve, it is likely that we will see more innovative ways to support parametric insurance, making it easier and more efficient for insurers to offer this type of coverage to their customers.

8. What would you point out as key areas of concern for Africa in the space of disaster risk management in the next three to five years?

Disaster risk management is still nascent in Africa, but it must accelerate significantly in the next three to 5 years in the face of climate catastrophes. The starting point at a country level is by adopting a risk layering approach, whereby a country decides how much climate risk it will retain and finance via budgetary reallocations or a savings fund and how much it will transfer out into the insurance markets. At the moment, there are only a handful of African countries that use a comprehensive disaster risk management approach.

9. If you could go back and give your 18-year-old self - one piece of advice - what would it be?

Life is full of twists and turns, and one cannot really predict how life will evolve - be curious and strive to always be learning and find a way to be useful to the community at large.

10. What is the one book you would recommend to your audience, and why?

This is a difficult one because there are a lot of good books. The most thought-provoking book I read recently is "Innumeracy" by John Allen Paulos in which he explores the decision-making errors people routinely make because of failing to understand basic mathematics.

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