Francois Kanimba, the central bank governor has said that the new insurance law that was evoked in March 2009, is set to boost Rwanda’s insurance industry, and raise penetration which is currently at one percent of the nation’s Gross Domestic Product (GDP).
Kanimba said recently during the, ‘All-Africa Insurance and Financial Services Summit 2009,’ that the new law will ensure that insurers and intermediaries are properly licensed. It will also ensure that players in the industry conduct their operations in a safe, sound and fair manner.
Kanimba said this while making a presentation on the,’’ restructure and reform of the, insurance sector in Africa at the conference that took early last week.
“The supervision and regulation of the insurance sector in Rwanda started only in 2002 with the formation of the National Insurance Commission. The operation of NIC was greatly hampered by the dearth of regulatory authority in the insurance law and the lack of supervisory capacity,” he said.
“The lack of supervisory authority and capacity exacerbated the predatory pricing problems in the industry,” he added.
According to the governor, the new law will monitor insurance companies’ financial position with a view to detect conditions that could lead to their inability to meet their contractual obligations, as early as possible.
Rwanda’s insurance industry is still small with only eight insurers, facilitated by only six insurance brokers.
Figures presented at the conference indicate that the industry comprises of five life and non-life insurers and medical insurers with annual growth in gross premium of about 40 percent in 2008.
There are no re-insurers or actuaries based in Rwanda and the market lacks risk assessors or loss adjusters.
The central bank says that with the legal and regulatory foundation in place, it is in the process of strengthening its supervisory capacity, fostering good corporate governance practices and healthy competition in the industry.
Rwanda’s slow economic growth, quoted at 5.7 percent this financial year from 11.2 percent last year is expected to affect the sector’s growth as well.
Insurance penetration in the East African region and Africa in general is also still very low, portraying a huge investment gap in the sector especially with life insurance.
Sammy M. Makove, CEO and Commissioner of Insurance, Insurance Regulatory Authority (IRA) Kenya said East Africa insurance premiums accounted for only 1.5 percent of the total African gross premium in 2006.
The figures exclude Burundi insurance premiums due to lack of statistics. He said total insurance premiums for East Africa amounted to approximately $860 million in 2007. Of which life insurance premiums contributed 31 percent while non-life was 69 percent.
Comparative figures in the industrialised countries show that life insurance premiums contribute 60 percent while non life contributing 40 percent.
Makove said there are around 35 life insurance companies in East Africa, but approximately only three percent of the East Africa population has life insurance. However, statistics suggest the growth in life insurance among the East Africa is quite fair.
“In 2007, while world life premiums grew by 5.4 percent, the emerging markets premiums grew by 13.1 percent. The East African life premium growth averaged 17 percent,” Mukove said.
He said this relatively high growth is expected to be sustained because currently the region has a young demographic structure and as it matures the demand for life insurance products increases.
Rwanda’s life premium grew by 19 percent, recording the highest growth in the region.
Kanimaba said that supplementary new insurance laws are in the drafting process as part of sector reform.
The laws include, nsurance contract law to cater for consumer protection that underpins market confidence, and compulsory Insurance Coverage law to protect the public by imposing professional insurance indemnity and insurance cover for certain vulnerable groups like construction site workers others uncovered risks.
With the social economic environment changing significantly and parents no longer relying on the provision by their children by their children at old age, Mukove says insurance penetration in the region will continue to grow.
“The growth will be further sustained by taking advantage of the high un-insured population which is over 90 percent in East Africa,” he said.