Amplifying the social protection of tontines thanks to a reassurance scheme in Cameroon

Many developing countries have defective National Social and Health Insurance Systems particularly because it is difficult to collect contributions from and manage the informal sector, with direct negative impact on their productivity. Financial associations called “tontines” are widely used in the informal sector to cover against unpredictable events (health, fires, funerals) through a relief fund system organized within a mutual aid community.

The preliminary study conducted by Social Broker during the preparatory phase confirmed that tontines, because of their very small size, expose their members to high and unpredictable premiums. If the number of events that need to be covered within a tontine rises, the most vulnerable members struggle to meet their contribution obligations, exposing themselves to exclusion or forced recovery penalties. Thus, during the study, on average 2 members out of 32 of the tontines were in default. Furthermore, the unpredictable contributions of their members force them to cover in priority events that are easy to verify (such as deaths) but less protective.

Social Broker in partnership with Assurance Universelle du Golfe and Opti-Solutions designed a re-insurance-like product called “TontineRe” to offer subsidized re-insurance contracts to tontines in order to provide financing, stabilization, underwriting and managerial assistance. TontineRe thus assumes all or part of the risk undertaken by tontines from their members through their relief fund by paying a reinsurance premium.

The long-term objective is to improve financial inclusion in terms of risk protection while reducing exclusion and inequities related to annual contributions within the traditional social protection model of the informal sector.

Another expected positive benefit is that enrolling in TontineRe would act as a tool for formalization, needs assessment and support to tontines, which have been informal actors thus far, offering a basic form of social protection.

A first FID funding as a Prepare Grant allowed Social Broker to conduct an unprecedented preliminary study with a sample of 241 tontines in the city of Douala in Cameroon in 2022 to better understand their operating mode, define their risk profile, and refine the insurance product model.

The objective of this new funding is to implement TontineRe with 80 tontines in the city of Douala.. This pilot project aims to test the operational functionality of TontineRe in real conditions (acceptability, fluidity of procedures, membership level, and compensation). In addition, it will collect first indicators on the ability of the reinsurance product to improve the financial situation of tontines and expand their coverage, thereby contributing to strengthen the financial and social protection of their members.