11 January 2016

Uganda: Insurance Boom Looms

IRA CEO Ibrahim KaddunabIInsurance industry poised for greater heights as PTA, Africa Re open liaison offices in Uganda

Prospects for the insurance industry look bright after two foreign re-insurance firms were given the green light to open liaison offices in Kampala by the Insurance Regulatory Authority Uganda (IRA-U).

Ibrahim Kaddunabi, the chief executive officer at IRA-U, said the African Reinsurance Corporation and the PTA Reinsurance Company based in Lagos, Nigeria and Lusaka, Zambia, respectively, applied for permission last October to open up operations in Uganda. This will greatly widen choice for the domestic insurance firms seeking for re-insurance services and products.

Presently, the two African insurance firms, which also own unspecified shares in the Uganda Reinsurance Company established in 2013, receive 15% re-insurance premiums from the country's insurance firms without their presence locally.

PTA Re was established in 1990 to foster the development of the insurance and reinsurance industry in the Common Market for Eastern and Southern African States (COMESA).

On the other hand, Africa Re is the leading reinsurer in Africa, operating across the continent. It was founded in 1976 by the member states of the African Union and the African Development Bank (ADB).

"The opening of liaison offices in Kampala would help in building capacity in the insurance industry as well as boost the profile to the insurance market, and so is the confidence for those with complex risks," Kaddunabi said.

He added that the establishment of the firm's liaison offices in Kampala would bring many advantages including saving local insurance firms from frequent travels to their headquarters for treaty negotiations.

"The presence of the re-insurance firms in the country will put local firms in a better position to negotiate their treaties, help build capacity for the Uganda's insurance market, and increase local underwritings," he added.

The interest of foreign re-insurance firms to set-up liaison offices in Uganda comes at the time the country is planning to start oil production in the Albertine region.

Last year, Uganda Re witnessed a surge in insurance premiums from Shs 638 million during the second half of 2013 to Shs 14.96 billion in 2014.

The non-life class-wise reinsurance premium ceded grew from Shs 90 billion in 2010 to Shs 162.58 billion in 2014. However, life re-insurance premiums ceded increased from merely Shs 3 billion to Shs 10.8 billion in the same period under review. Last year, PTA Re reported 25,2% growth in premium income for the period ending December 2014 to Shs 408.5 billion from Shs 328.23 billion in 2013 due to prudent risk management, improved underwriting results in the property class of business and increased investment income.

In the period under review, the firm's net insurance claims rose to Shs 163.4 billion compared to Shs 132.4 billion in 2013. The firm's investment portfolio grew by 31. 98% to Shs 632.1 billion from Shs 479 billion registered in 2013.

Africa Re, whose current shareholding comprises 41 member states, the ADB and more than 100 African insurance and reinsurance companies - together holding a 75% stake in the company as well as other development finance institutions and strategic partners - registered a 7% growth in gross premiums to Shs 2.34 trillion, compared with the previous year.

Over the years, the growth in the insurance industry has continued to register continuous growth trend in gross underwritten premiums.

Last year, Uganda's insurance industry premiums grew a less than expected 9% to Shs 504.8 billion due to introduction of new taxes, slow growth in the economy, depreciation of the shilling, and low export volumes.

During the same period, the insurance asset rose from Shs 638 billion to Shs 750 billion signifying a growing trend of companies capability to handle insurance risks.

Currently, Uganda has 85 insurance players consisting of 29 insurance companies (21 firms for non-life /general insurance and 8 firms for life assurance business); one re-insurer, six Health Membership Organizations (HMOs), 29 insurance brokers, one re-insurance broker and 18 Loss Assessors/Adjusters.

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