Rwanda’s insurance industry could soon welcome a new entrant after Bank of Kigali got a central bank nod to provide insurance services. The development should be seen as a relief especially with the low penetration levels which remain a great challenge the country has had to deal with for years.

Sector players and experts say the entry of BK General Insurance Company could change the dynamics of industry and help drive innovation and competitiveness. The new insurer is a subsidiary of Bank of Kigali, Rwanda’s largest lender by asset base.

Confirming the development, Dr Diane Karusisi, the Bank of Kigali chief executive officer, said the bank is already in talks with Aprica Investments Ltd to acquire a strategic shareholding of 30 per cent in the BK General Insurance Company.

Karusisi said the firm recently obtained a non-life insurance licence after approvals by the central bank (the sector regulator) to provide insurance services. The development could mean heightened competition and innovation, the key ingredients required to propel the sector to another level. This will make the sector more attractive, as well as push up penetration levels, according to Dr Blaise Uhagaze, the secretary general of the Association of Rwanda Insurers.

Rwanda’s insurance penetration remain low at about 2 per cent. Industry experts attribute the low uptake rate to lack of innovation and limited public awareness.

In fact, the country lags behind other regional peers, with penetration levels in Kenya (2.9 per cent) and the Africa average standing at 2.8 per cent.

There are currently eight non-life insurers, four life insurers, two public medical insurers, 15 insurance brokers, 365 insurance agents, 12 loss adjusters, one public pension scheme managed by Rwanda Social Security Board (RSSB) and 57 private pension schemes. Central bank statistics indicate that the local insurance sector continues to register considerable growth in terms of total assets and capitalisation.

The industry’s total assets increased by 12 per cent to Rwf306 billion in 2015, up from Rwf272 billion in December 2014.

John Rwangombwa, the National Bank of Rwanda governor, has challenged insurance sector players on many occasions to offer Rwandans products that suit their different needs and income levels to boost penetration levels. Therefore, the entry of new players, like BK General Insurance, is expected to raise capital investment into the sector and make it strong and more vibrant.

Jean Pierre Majoro, the Association of Insurance Companies in Rwanda executive secretary, argued that the sector can only improve if players invest in skills and innovation. Majoro said in an earlier interview with Business Times that the penetration rate in the informal sector of the economy is still low "because sector players have not been innovative enough to design products that suit this sector”.

Majoro urged industry players to develop products that target small-and-medium entrepreneurs (SMEs) to enhance uptake rates, profits and hence make the sector more competitive. He said some areas and economic activities are not covered, noting that this has affected penetration levels.

He said though many insurers consider the informal sector to be risky, it presents them huge growth opportunities, which could improve insurance uptake rate in the long-run. Majoro also said there is need to establish an insurers’ training institution to help boost skills and capacity of industry players.

Celestin Rwabukumba, the chief executive of Rwanda Stock Exchange (RSE), challenged players, including new entrant BK General Insurance, to ensure product diversification and value addition.

"I expect more competition but also diversification in terms of products and value addition as a way of attracting new customers,” Rwabukumba said.

He argued that insurance penetration levels have remained low because players have not diversified into other sectors, like agriculture and the SME industry. He added that investing in micro-insurance will also help unlock the sector’s potential and make it more attractive

business@newtimes.co.rw