Nairobi — Large amounts of money that leave Tanzania to pay underwriting services abroad are to blame for the poor showing of the insurance sector which has a retention ratio of only 20 per cent.
Finance Minister Zakia Meghji said the industry has to increase the investment in the sector, in order to provide appropriate risk underwriting capacity to curb capital flight from Tanzania.
Insurance investments in the country have increased from Tsh37 billion ($29.6 million) in 1997 to Tsh141 billion ($112.8 million) last year though the industry contributes just one per cent of the GDP.
Mrs Meghji said that insurance firms need to strategise to contribute significantly to the fight against poverty.
Since liberalisation of the industry in 1996, the number of insurance firms has grown to 17 and 50 brokers, from two companies and one broker, while insurance agents number about 500.
According to the minister, the improved macroeconomic environment together with the continued financial sector reforms are having a positive impact on business and the financial sector, including insurance.
Commissioner of Insurance for the Insurance Supervisory Division (ISD) Israel Kamuzora said the insurance industry has been growing at a rate of 15 per cent annually.
Mr Kamuzora said the industry is up for radical reforms to enable it to cope with fast evolving economic and social trends in the region and beyond.
The commissioner said a negative public attitude, low capital and lack of skills as well as entrepreneurship were hampering the sector.
Plans are underway to allow banks to sell insurance products, while the government was looking at the possibility of insuring some of its assets.
According to Mr Kamuzora, the increased cases of natural catastrophes globally were among the challenges the industry would be facing in the future.
"While the Americas are now lashed by hurricanes, in Tanzania we are now witnessing increased cases of earth tremors and volcanic eruptions," he said.
With total market premiums at $91.45 million in 2006, the Tanzanian market represents a tiny fraction of Africa's total market premium, which stood at $49 billion during the year, with South Africa accounting for the lion's share - 93 per cent of the life premiums and 60 per cent total non-life premiums.