Recent fire and weather related disasters reported across the country over the last week are a stark reminder of the role of insurance especially for business operators. The incidences are evidence that unforeseen incidents could bring to an end business enterprises that took years to build. While insurance is necessary to cushion asset owners in the event of incidents, liquidity challenges and cash flow challenges could at times see businesses operators not in position to pay for their insurance premiums when they are due. This would mean having to wait months to put together the amounts for the premium and remaining uninsured. Banque Populaire du Rwanda Plc. (BPR Plc) has a tailor made service dubbed Insurance Premium Financing (IPF) designed to assist businesses to pay annual insurance premiums. The product is built with features such as a speedy approval process and repayment period of up to 10 months with affordable interest rates. The facility is handy and ideal for businesses allowing them room to increase business cash flow by allowing payment of premiums in instalments versus a lump sum. The intervention reduces burden on businesses in paying insurance premiums especially for operators with large assets or considerably higher premiums. To access the facility, a business operator does not need to assign assets as collateral or security for the credit. The insurance company serves as a guarantor of the borrower such that if the latter fails to honour their obligations, the bank can proceed to call up the guarantee and demand for the unutilized portion of the insurance premiums from the insurance company to be used to pay off the outstanding loan balance. The premium financing facility can be used to pay for general insurance premiums for commercial property, (fire and other lines of business insurance), machinery and equipment, motor vehicles and contractors’ all risk. In the application of the facility, an applicant requires endorsement by an insurer as it creates certain rights and financial interest of the Bank in the insurance policy financed and should therefore be noted in the policy appropriately. When approved, the total sum is disbursed directly to the insurance company, after the applicant has provided their participation. As part of their participation, the applicant is expected to provide participation equivalent to at least 2-month installments of the annual premium. The facility’s interest rate is below ordinary lending rates at a flat rate of 8 per cent. The facility targets both large and small enterprises with minimum amounts eligible at Rwf100,000 and a maximum of Rwf200,000,000. The repayment of the IPF is done in equal monthly instalments not exceeding 10 months. After bulk payment is paid by the Bank to the insurance company, collection (repayment) is done on a monthly basis for 10 months. Having valid insurance contracts also improves chances of a business using the insured asset as collateral for loans. Clients can apply for the facility at any BPR branch country wide.
