Rwanda’s insurance sector has, for the first time in six years, made an underwriting profit in the first half of 2023, according to John Rwangombwa, Governor of the National Bank of Rwanda.

Underwriting profit consists of the earned premium remaining after claims have been paid and administrative expenses deducted. It does not include any investment income earned on held premiums.

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During the presentation of Monetary Policy and Financial Stability Statement on September 20, Rwangombwa clarified that the sector has been making profit over the years from investments, not from the actual insurance business.

Central bank figures over the last three years indicate that in June 2021, the insurance sector had an underwriting loss of Rwf200 million, in the same period of 2022, it was Rwf400 million, however, in June 2023, they recorded an underwriting profit of Rwf1.9 billion.

Overall, the sector saw an increase in profit from Rwf7.1 billion in 2021 to Rwf12 billion in June 2023.

Asked whether this performance can attract more players in the sector, Rwangombwa said that it has enough players in the insurance market, however, what is required is to think of new products that can appeal to the needs of customers.

"The sector has stabilised and is on a good path, we expect to see more innovations, development, and efficiency in the way they deliver their services.”

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Since 2016, steps taken to stabilise the sector, according to him, include the regulatory approach to put order within the association and stop pricing issues they had at that time.

"In 2018, when they increased premiums for vehicles, they set a minimum price, and that in a way prohibited the undercutting of prices that people were doing to attract the market.”

In addition, there was an improvement in working with garages to avoid leakages in terms of fraud around motor vehicle repairs, and the sector recently reviewed the pricing with an increase in third-party premiums.

"They are doing more realistic pricing of risks than before,” noted Rwangombwa.

Annie Mireille Nibishaka, Managing Director of Old Mutual and Chairperson of Rwanda’s Insurance Association (ASSAR), said that the 50 per cent increase of third-party premiums on motor insurance has greatly contributed to this growth.

"The increase has triggered the underwriting profit because motor insurance is mandatory due to the risks attached, medical insurance has been performing well since last year. In a nutshell there was growth but still more work to do.”

She added that there are ongoing efforts to digitise the sector to facilitate depository recording, claims classification and response, for better service delivery.

Insurance is classified into two categories namely; general (non-life) insurance and life business, with the former remaining the highest contributor to private insurance premiums, with 79 per cent of premiums of private insurers, and 46 per cent of the sector’s total gross written premiums as of June 2023.

The general insurance business is largely dominated by motor and medical insurance classes of business.

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Total assets of the sector increased by 17.3 per cent to Rwf877 billion from Rwf748 billion recorded in June 2022. Premiums written grew at a high rate compared to the corresponding period with a 21 per cent increase in June 2023 compared to the growth of 16 per cent registered in 2022.

Claims in terms of value within the private insurance sector increased at a moderate rate during the period under review. The total value of claims increased by three per cent to Rwf30.4 billion. Notably, the claims ratio—the ratio of claims incurred to net premium earned—reduced from 64 per cent to 57 per cent in June 2023 within the private insurance sector.

All categories of insurers recorded double-digit growth between June 2022 and June 2023 reflecting higher returns on investment income and improvement in underwriting performance, stated the central bank.