Insurance Premiums Hit Sh167 Billion

UGANDA'S insurance industry accumulated gross premium worth sh167b ($84m) written by licenced insurance companies by 2008, according to the annual report by the Uganda Insurers Association (UIA) issued last week.

Of the total premiums, non-life insurance accounted for 91% and life premiums stood at 9%, a state that requires public sensitisation about the relevance of insurance policies that are not mandatory.

The non-life policies, especially incorporate the motor third party, a statutory insurance policy which accounted for 90% of the industry's total revenue.

The industry, however, recorded a reduction in the total assets amounting to sh1.912b in 2008 down from sh1.921b in 2007. Similarly, the total reserves and liabilities were sh1.912b in 2008 as opposed to sh1.921b in 2007.

The report indicates that whereas there has been a positive growth in the insurance sector, the country's insurance market penetration level still lags behind industry averages if put on the scale of the African continent. In 2008, Uganda accounted for only 0.4% of the total African gross premium while South Africa, the continent's insurance giant, accounted for 80% with 15.3 penetration rate in an economy of up to $280b of GDP.

The gross premiums and market penetration rates on African scale for 2008 puts Uganda at 0.6% operating under an economy worth $13b of gross domestic product (GDP), lagging far behind Kenya which commands a penetration rate of 2.5% with GDP of $29b.

There were 21 licenced insurance companies operating in Uganda at the end of 2008, 14 of which were non-life insurance companies, while six were composite companies offering both life and non-life insurance policies and six companies out of the 21 were offering micro-insurance products despite the low premiums that accrue from that segment.

In the same report, the UIA chief executive officer, Dr. Olli-Pekka Ruuskanen, says Uganda's insurance industry is not flourishing due to the absence of a national re-insurance company. This, he added, leads to part of local premiums leaving Uganda to countries with re-insurance companies.

"Uganda has no national re-insurance company unlike in her neighbours Kenya and Tanzania.

"As a result, 40% of the premiums leave the country every year," the report states.

The total amount repatriated to re-insurers outside Uganda in 2008 was approximately $33.6m.

A re-insurance company is one which insures insurance companies against very large claims from their clients, which may not be easily cleared. In case of a loss suffered, the re-insurance company compensates the insurer for their financial loss.

"Clearly, this means that re-insurance companies require a lot of capital to operate, which is why a national re-insurer developed by all the insurance companies together, is usually a good solution."

Dr. Olli-Pekka is, however, optimistic that the industry is on the right track to achieving greater profitability and solvency. He says the sector employs a first-class workforce and adheres to best practices in an efficiently regulated environment with ample underwriting capacity in both direct insurance and re-insurance.