Rwanda Focus (Kigali)

Rwanda: Optimism for Insurance As Dividends Expected to Increase

Experts are upbeat that the country's insurance sector is set to post a positive outlook this year considering the 2013 improved performance.

The fragile sector enjoyed a strong liquidity position with a ratio of 360% from 240% as of September last year, a fact attributed mainly to the entrance of two new players: Radiant Insurance company and Kenya based UAP insurance. With the arrival of these new players, the insurance sector enjoyed a vibrant 2013 as it experienced buoyant growth with increases in gross premiums, net profits and total assets.

According to Central Bank statistics, the sector's total assets grew by over 26%, to over Frw 222 billion by the end of the third quarter 2013 from Frw 176 billion in the same period in 2012.

Meanwhile, gross premiums grew to Frw 39 billion up from Frw 33 billion, indicating an increase of more than 16% for the sector, something that paints optimism for the industry.

Moreover, the growth has also led to increased penetration of insurance products in the market, standing at less than 10% of the total population, with discretionary health insurance products as dominant product.

The discretionary health products that are provided by Rwanda Social Security Board (RSSB) and Military Medical Insurance (MMI), the industry's two main players, are responsible for 56% of the total assets at Frw 125 billion, and 77% of the sector's capital at that amounts to Frw 118 billion.

"With insurance companies expecting to increase penetration into the market, the dividends of the insurance firms can only get better," said Isaac Karasanyi, an economic expert on non-banking financial institutions. "But with government working on enlarging the private sector, expect more people acquiring the new and different insurance mechanisms on offer."

Indeed, with the new entrants in the budding sector, such as UAP insurance and Radiant Insurance, one expects new products and a growth of premiums, because many Rwandans are not insured outside of medical insurance. UAP has introduced a cross-border health insurance scheme and Radiant Insurance has introduced an innovative agriculture insurance cover.

Before the introduction of the agriculture insurance cover, low income earners had access to only the national mutual health insurance scheme commonly known as Mutuelle de Sante which has enabled over 92% of the national population to be covered by health insurance.

New law

The sector has also enjoyed an average annual growth between 20% and 30% over the past three years with an increase of 26% projected by the analysts in the 2014. Experts believe it is a result of the product variation from the industry players that came into existence as a consequence on the new law regarding the sector.

The new law aligned operations to international best practices by separating underwriting of life and general insurance policies to ensure efficiency. This has enabled the creation of new companies and the entrance of new players in the sector with particular specialization in one of the new policies.

Sonarwa, the country's oldest insurance firm, and Soras, the first private insurance firm, were forced to split into two new separate companies as a result of this new law: on for general insurance and one for life insurance.

Francis Mugerwa, an insurer with Radiant Insurance company, says that this does not worry the new players in the sector, as there is still a lot of room for breakthrough and penetration.

"With the majority of the growth of the bigger firms coming from unrestricted products, new firms still have a chance to breakthrough with varying innovative new products," he states.

With this optimism for 2014, one expects the sector to enjoy a slow but steady growth in all aspects of the business.

Ever since the National Bank of Rwanda took up the initiative to streamline and supervise insurance, public confidence in the non-banking sector has grown, leading to an increased number of players in the sector.

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