The Parliamentary Standing Committee on Economy and Trade has tasked the Central Bank to devise new strategies that will increase insurance penetration among different property owners and thus avoid financial losses and impact on the national economy in case of any disasters.
The MPs said this on Thursday, February 27, 2020 as the committee started scrutiny of the 2018/2019 Central Bank report.
Central Bank Governor, John Rwangombwa told the committee that insurance penetration is still low at 1.7 per cent meaning that a big part of the National GDP is not insured.
Total assets of the insurance sector increased from Rwf509.8 billion in December 2019 from Rwf452.5 billion in 2018 which is 13 percent increment and this is slightly over 1.7 percent of GDP.
According to the Monetary Policy and Financial Stability Statement, the increase in 2019 was supported by capital injections of Rwf4.3 billion and retained earnings worth Rwf46.6 billion.
The Insurance sector’s total premiums increased from Rwf134 billion in 2018 to Rwf153.4 billion in 2019 of which general insurance accounts for 81 per cent of total premiums while life insurance represents 19 per cent of the total premiums.
Motor insurance accounted for 35.8 per cent of total private insurers’ premiums in 2019.
Théogène Munyangeyo, the Chairperson of the Committee on Economy and Trade said that there should be strategies that make it mandatory for property owners to penetrate into insurance.
"It should be compulsory for all houses and other properties as well as cooperatives that have a certain turnover to be insured but there should be new strategies for that,” he said.
The MPs also said that when properties get insured to avoid losses to the owners, it will also pave the way for banks to provide more loans to different sectors including the agriculture sector that still lags behind in getting loans from banks.
"There is a need for more awareness to increase insurance penetration among property owners but if the low penetration persists, a law can be enacted for enforcement because when a property owner faces losses due to certain disasters it affects the whole chain of economy,” he said.
He urged government institutions that collect taxes to also consider deducting insurance fees for their properties at the same time of collecting taxes.
"We think that if more people penetrate into insurance sector, it will even reduce the cost of insurance,” he said.
New insurance campaign
Rwangomba reassured MPs that strategies are being devised to increase insurance penetration in partnership with Rwanda Insurers Association (ASSAR).
He said that an insurance week is being organized to take place at the end of March this year, and he said it will be an opportunity to raise awareness and discuss areas that are not covered by insurance.
"All properties should be insured and that means our GDP will also be insured and insurance sector’s contribution to GDP will increase from the current 1.7 per cent,” he said.
However, he said while most of property owners are yet to understand the role of insurance, there are still a few companies and they have limited insurance products to the people.
"We are going to assess all areas that are not covered by insurance, why insurers are not reaching all people and discuss the way forward. This will ensure that even banks get ways to provide loans without any expected risks,” he said.
Peace Masozera Uwase, Executive Director at the National Bank of Rwanda’s Financial Stability Directorate said there are studies that are going to be carried out in March this year in partnership with the World Bank and IMF so as to design new financial sector strategy that will also include issues of insurance penetration.