Rwanda’s nascent insurance industry this year showed its potential by attracting foreign players, who have invested in the market through acquisitions, mergers as well as setting up new operations.

Though one could mistake the mergers and acquisition as a sign of a struggling sector, facts on the ground paint a different picture as the insurance industry increased its assets by 13 per cent in the year ended June 2014.

The sector’s capital also increased by 15 per cent over the period, according to central bank data.

Acquisitions galore

The marriages included Saham, a Moroccan investment company, which bought a 66.7 per cent stake in insurance firm Corar SA for an undisclosed amount in April after receiving the necessary regulatory approvals from the central bank.

Two months later in June, Soras Group, concluded an agreement worth $24.3 million that gave Sanlam, a South African financial services firm a 63 per cent majority shareholding in the company.

The acquisitions and mergers galore were to continue when Greenoaks Global Holding bought a controlling skate in two local insurance firms in October, Prime Life Assurance and Cogear. The move also resulted into the rebranding of the two companies to Prime Life Insurance and Prime General Insurance, respectively.

The buyouts mean that two companies now have 27 branches nationwide and 200 insurance agents.

During the year, one of Kenya’s largest underwriters, Britam, entered the market. Britam set up a general insurance services business in July, joining other Kenyan insurance players like Phoenix Assurance and UAP that had opened shop in Kigali in the previous years.

These developments have greatly boosted the insurance sector in terms of capitalisation, and also increased the number of players to 12 private insurers, eight of which are general insurers and four are life insurers.

Why increase interest in the local market

Though the sector has registered significant growth in terms of assets over the years, it is still grappling with low levels of penetration which stood at about 1.6 per cent at the start of this year, below the continent’s average of three per cent.

The global average is between eight and nine per cent.

The low penetration levels, therefore, provide a fertile ground for the new players to compete with old-timers, especially if they introduce innovative, better tailored products for clients, ensure great customer service, as well as use efficient distribution channels like Information Communication Technologies (ICTs) to deliver their services.

Tailor-made products for farmers, small-and-medium enterprise (SME) proprietors, for instance, could give any insurer huge market share. This target market and motor vehicle owners should therefore be the main focus of insurers that want to have an edge in the industry in the New Year.

In fact, the serious collateral damage most SMEs suffered in fire breakouts across the country this year could have been eased if insurers had targeted products for this market that has been largely ignored.

Many farmers also saw their efforts wilt away or get washed away in floods, rendering them a heavy blow that left them helpless.

Products for farmers could therefore come in handy, but need to be well marketed and the population sensitised.

On motor vehicle insurance, a compulsory cover for vehicle owners, there has been complaints of price undercutting among the insurance firms, which saw them lose Rwf4 billion in premium underselling during the first six months of this year.

These three issues just show how many uninsured assets are out there whose risks Rwandans don’t know of.

Hopefully, insurance firms have identified the challenges facing the industry as well as the opportunities the sector presents and came up with initiatives that will increase policy uptake and penetration in 2015.

When UAP Rwanda, a subsidiary of Kenyan under-writer giant, UAP Group, launched two products in October aimed at reducing losses for farmers and SMEs, could have had these issues in plan.

The firm’s chief executive officer, Pauline Wanjohi, said under the UAP Icyashara policy, the firm would cover SMEs against loss or damage to property caused by fire, burglary and terrorism. She said the firm’s agro-insurance products would provide cover for crops and livestock against drought, excessive rainfall, hailstorms, flooding, frost damage, fire, as well as pests and diseases.

Wanjohi said they would focus on cereals like wheat, barley, and maize, as well as coffee, tobacco, cut flowers; greenhouses and irrigation equipment.

Curbing unfair competition

To prevent further loss to the sector, the central bank and insurance industry association, Association des Assureurs du Rwanda (ASSAR), came up with a minimum charge for motor vehicle insurance cover following many cases of price undercutting.

Despite this safeguard, some players have indicated that there are still traces of the malpractice in the market.

Industry performance

Rwanda’s insurance sector’s total assets grew by 13 per cent, from Rwf219 billion in June last year to Rwf247 billion in June, according to statistics from the central bank.

During the reporting period, the industry’s capital grew by 15 per cent and gross premiums by 14 per cent, from Rwf158 billion and Rwf39 billion to Rwf180 billion and Rwf45 billion, respectively.

The claims ratio increased by 5 per cent, from 44 per cent to 49 per cent, but this is still below the maximum prudential benchmark of 60 per cent.

It is, therefore, imperative that firms expedite claims repayment processes, invest in products that reach out to the rural financially-excluded and provide affordable premiums to clients to be competitive and relevant in the coming year.