Rwanda’s insurance sector could emerge as a lucrative area for investors, with the central bank saying that insurance penetration rate in the country will grow robustly to 10 percent by 2020.
With a ratio of gross premiums to Gross Domestic Product (GDP) of 2.3 percent in 2010, up from 1 percent in 2005, insurance penetration in Rwanda remains miserably low even though the central bank says that the sector has grown over the past years. Insurance penetration in Rwanda is also still far below that of middle income economies, where insurance accounts for 10 percent of GDP.
“BNR’s target is to achieve 10 percent insurance penetration ratio by 2020 and with the current reforms going on and minimisation of the existing challenges, it is hoped the target will be attained,” the central bank said in its recent monetary policy and financial stability report.
Since 2005, according to the report, consolidated assets for insurance companies have grown significantly from Rwf31.8 billion to Rwf119 billion in 2010 while gross premiums rose from Rwf13.7 billion to Rwf54 billion.
With nine insurance companies, four licensed insurance brokers and 120 insurance agents, Rwanda’s insurance sector is still at its nascent stage but shows signs of strong growth in next few years.
To realize the sector’s potential and meet its target, the central bank drafted the insurance contract law, two regulations relating to liquidation and dissolution and the regulations on mergers and closure of insurers.
The laws will ensure that industry players are properly licensed and conduct their operations in a safe, sound and fair manner, the bank says.
However, severe shortage of skilled people and a lack of public awareness are the major challenges that are undermining the growth in the sector.
The central bank says that its recent financial and management audit of the sector recommends continuous capacity building at all levels.
François Kanimba, Governor of the central bank told Business Times in an interview late last year that major findings of the audit range from non separation of short and long term insurance business, capital inadequacy and improper valuation of assets and liabilities to corporate governance issues.
The regulator and insurance firms have however upped efforts to promote knowledge of insurance, especially in areas of increasing insurance products as well as attracting more players in the industry.