BK Group Plc recently announced plans to merge its subsidiary, BK General Insurance with Rwanda Social Security Board (RSSB)-owned Sonarwa General and Sonarwa Life Assurance, in a move to increase and consolidate their market share, Analysts say this development, coupled with more consolidation among other players, could transform the industry by boosting innovation and expanding insurance coverage. “Market players are watching closely, hoping to learn a thing or two (from this merger) to be able to benefit the masses,” says Andrew Kulayige, Chairperson of the Rwanda Association of Insurers (ASSAR). Kulayige, who doubles as the CEO of Britam Insurance Rwanda, observes that there are possibilities the market might witness more mergers. “We may see more consolidation in the sector, or individual companies might inject additional capital to stay competitive, he notes, adding that the industry presents untapped potential given the low penetration rate. The increased insurance market consolidation is also likely to address the persistent low insurance uptake among the population. Rwanda’s insurance sector has recorded moderate growth over the years. However, the penetration rate is currently below the global average. Insurance penetration currently stands at 2.1 per cent, way below the 7 per cent global average. Potential for growth These low levels, although pose a challenge to millions of people who are uninsured, it also signals untapped potential. But industry observers argue that penetration alone will not address the challenges that the sector is facing. To elevate progress in the sector, claim settlements, premium growth, population awareness of the services, and consumer retention are seen as key in addressing the challenges in the industry. Digital transformation, for instance, is something that insurance providers have prioritised to extend their services and products even to those who currently have no access to insurance. The increased adoption of digital technologies like mobile-based insurance solutions, offers the sector the opportunity to leverage on technology to grow product distribution, customer engagement and operational efficiency. For Kulayige, digital transformation in insurance is heavily dependent on capacity. “Without the right infrastructure and expertise, digitisation is challenging. But with the right tools, we can develop products that reach and benefit a broader segment of the population.” According to Seth Kwizera, the Executive Director at the Economic Policy Research Network (EPRN), an economic research institution based in Kigali, mergers such as that between BK Group and RSSB have potential to strengthen the insurance sector by boosting efficiencies and investor confidence. “The sector has a big role to play in economic development as it can be used as a vehicle of mobilising domestic savings and long-term investments,” he says of the sector’s role. The outlook According to Africa Insurance Outlook 2024/2025 by audit firm Deloitte Africa’s insurance market has faced serious economic challenges over the past year. However, the East African insurance market has shown resilience and growth despite obstacles. Kenya, Tanzania and Uganda, have varying degrees of insurance penetration, driven by public awareness and new distribution channels. Kenya saw a 4 per cent growth in gross written premiums in 2022, while Tanzania experienced significant life insurance premium growth. The region’s insurers have shown increased focus on digital transformation and innovative products to meet diverse customer needs. In 2022, the insurance penetration rate in East Africa was 1.39 per cent, with Kenya leading at 2.14 per cent, while Tanzania, Uganda, and Ethiopia had lower rates of 0.62 per cent, 0.74 per cent, and 0.3 per cent, respectively. Former Governor of the National Bank of Rwanda (BNR), John Rwangombwa, previously noted that the insurance sector remains one of the most underdeveloped areas within the financial services industry. He emphasized that this presents a significant opportunity for innovation in delivering insurance products. In response, the central bank is currently formulating a new insurance strategy aimed at fostering innovation and accelerating digitisation. This strategy will promote the development of creative insurance solutions that address emerging risks and meet the diverse needs of the population, all while maintaining strong data protection and privacy measures. While low insurance penetration has often been seen as a barrier to sector growth, it also offers a promising opportunity. By raising public awareness, creating more innovative and inclusive products, and improving accessibility, insurance companies can tap into the underserved market and drive both adoption and long-term growth.
