Hey crew, here’s to another week of cutting through the noise and focusing on what actually moves financial minds forward.

No buzzwords, just clear shifts you can use:

🌂 Here’s Another Dig At Insurance

⚡️ Pump Fiction: Fuel Prices Go Vrrroooom!

📈 Stock Market Finds More Middlemen

Here’s to the 107th edition

Let’s dive in.

In the traditional Ethiopian insurance market, we are accustomed to lengthy claim payouts. Making us seriously question the very use of having an insurance policy.

The reason is because it’s an indemnity-based insurance policy, which means you need to provide police reports; a technical surveyor from the insurance company has to come on-site and make a judgement; and then you have to argue over the valuation of the damage.

But there is a faster, more transparent way to manage risk that is gaining traction globally: Parametric Insurance.

Unlike traditional insurance that pays for a loss, parametric insurance pays upon the occurrence of a specific event (or index) that is highly correlated with your actual loss.

Think of it this way:

The beauty of the second option is its simplicity. The insurance company doesn't need to visit your farm or warehouse. If the data from a trusted source (like a satellite or weather station) hits the "trigger," you get paid, often within days instead of months.

How did we come across this sorcery, you may ask?

None other than the Puerto Rican ኮከብ Bad Bunny.

During his concert tour in Medellín, Colombia, his team faced a massive financial risk from canceling the sold-out concert due to potential rain at an open-air stadium.

Traditional insurance was too slow and the nearest official weather sensor was too far to be accurate.

Now, the biggest challenge with parametric insurance is basis risk. This is the gap between the insurance payout and your actual loss. For example, it might not rain enough at the official National Meteorology Agency station, avoiding a payout, even though the open-air stadium just a few kilometers away pours ያበደ ጎርፍ.

A fascinating solution to this problem emerged.

The insurance brokers installed a temporary, high-precision weather station inside the stadium. This was then linked to a custom insurance policy that would pay out instantly if rainfall exceeded a set threshold right there at the venue. By putting the sensor at the point of risk, they eliminated basis risk.

Remember, just last week, insurance companies got a new sector-specific regulator. This could potentially open the door for more sophisticated insurance products to be approved by the regulator.

The insurance association is also talking BIG about tech adoption and innovation.

Time to move on beyond just developing a mobile app and finally launch insurance products that address our needs?

We have a few ideas of our own.

We’ve moved from ኮሽም and broken bottles stuccoed on our fences, to አደጌኛ አጥር and now wifi-connected security cameras.

Traditional home insurance relies on you proving a loss after it happens. Smart home devices including cameras, motion sensors and smart locks allow for Real-Time Burglary Parametric Insurance.

Instead of waiting for a police report, a payout could be triggered the moment a smart lock is "force-opened" or a verified motion sensor is tripped while the security system is armed.

A "G-force trigger" detects an impact exceeding a certain threshold. The policyholder doesn’t need to submit a claim. The car "tells" the insurer it has been hit.

You confirm the event on your phone, maybe even send a picture and the insurance company can automatically dispatch a tow truck to the GPS coordinates.

You receive funds for a rental car or transport before you even leave the scene.

This is perhaps sensitive but the most personalized. Smartwatches and fitness trackers provide a constant stream of health data like heart rate, sleep patterns and blood oxygen levels.

For a life insurance policy, a sudden, sustained cessation of heart rate data could trigger an immediate "funeral expense" payout to the family within hours.

On the less grim side, a policy could be tailored to your lifestyle. If your wearable proves you walk 10,000 steps a day or maintain a healthy heart rate, your premium could drop in real-time. It moves insurance from a "death benefit" to a "life incentive."

Traditional indemnity-based insurance isn't going anywhere, and you can’t fully rely on parametric insurance. Neither approach is perfect.

What you might want is to combine the simplicity and objectivity of parametric insurance with the specificity of loss-based insurance.

Imagine a policy that uses the parametric method to pay out a small, immediate "emergency liquidity" sum (say ETB 5,000) the second an intrusion is detected. This allows the homeowner to immediately repair a broken door before further loss occurs. While the policy also includes the traditional indemnity method to consider the police and technical assessor’s report and properly reimburse the value of your actual loss.

Fuel prices have gone up again.

White diesel is now retailing at 180.46 birr per liter, while gasoline has reached 167.50 birr per liter. For context, this was Ethiopia’s second fuel price increase in just a month, with benzene up 17.6% and white diesel up 10.7% this latest round.

This matters because fuel is not just something drivers complain about while pretending not to look at the meter.

Fuel touches everything.

It affects transport fares, food distribution, construction costs, logistics, factory operations, delivery businesses, and probably the price of your favorite ሽሮ if we investigate hard enough.

The government’s problem is simple but painful: Ethiopia imports fuel, pays in foreign currency, and has been trying to reduce the burden of subsidies - hence the push towards Electric Vehicles. According to AP, Ethiopia’s fuel import bill is around $4.2 billion annually, while monthly fuel subsidies can reach up to $128 million.

How does this affect me?

Whether you own an EV, or don’t own a car at all, fuel prices own you.

Higher fuel prices can quietly show up in your grocery bill, taxi fare, rent, restaurant menu, delivery fee, and construction material prices. This is why fuel inflation is everyone’s business, including those of us whose main vehicle is walking.

The Ethiopian Securities Exchange (ESX) is still young, and the furniture is arriving.

The ESX has onboarded Siinqee Investment Bank and First Addis Investment Bank as its 6th and 7th trading members. In simple English: more institutions are now allowed to help investors buy and sell investment securities on the exchange.

This is important because a stock exchange is not just a website with numbers moving up and down.

For a market to work, you need listed companies, investors, brokers, investment banks, regulators, custody systems, clear rules, and enough trust that people don’t ask, “Who do I need to know here to get things moving?”

Trading members are part of that plumbing.

The more qualified intermediaries Ethiopia has, the easier it becomes for companies to raise capital and for investors to access opportunities beyond apartments and “let’s open a café.”

How does this affect me?

For now, not dramatically. Ethiopia’s capital market is still in the early “please read the manual before touching anything” stage.

But over time, this could open new investment options for ordinary Ethiopians, diaspora investors, pension funds, insurers, and companies looking for long-term financing.

All Things Considered

The capital market is still nascent given you can still only buy Wegagen, Gadaa and Awash Bank shares through the ESX, meaning there are more intermediaries than actual listed companies. Ethiopia’s financial system has been bank-heavy for a very long time, and will likely continue to be. A maturing capital market could slowly change that.

Slowly is doing a lot of work there. But still, progress.