Rwanda’s insurance sector retained earnings worth Rwf46.6 billion last year from premiums and other interest generating activities, thanks particularly to the increased assets of insurance firms.

The budget framework paper (BFP) presented last week by the Finance Minister, Uzziel Ndahijimana, shows that total assets of the insurance sector increased by 13 per cent.

Assets increased to Rwf509.7 billion in December last year from Rwf452 billion in the same period in 2018.

Insurance is an industry that, essentially, takes in money and invests that money before subsequently paying claims. with higher investment returns, there’s more profit being generated by the insurance sector, analysts say.

But the increased growth in assets of the domestic sector insurance is mainly attributed to capital injection of Rwf4.3 billion and retained earnings of Rwf46.6 billion.

The sector makes profits from other investments such as real estate, equities, and government securities.

Ndajigijimana told lawmakers on Thursday that the insurance sector remained solvent and maintained capital buffers above the minimum prudential requirements.

Gaudens Kanamugire, the president of Association of Insurers, asserts that the sector performance was supported by economic growth.

"The economic environment was favoUrable. As the country grows, the insurance sector grows together with the economy,” he said.

The general population is, on one hand, getting more and more sensitized about insurance and on the other, market players are deploying aggressive marketing, Kanamugire notes.

"For example, more people are taking medical insurance. Whoever has some little purchasing power would like to have some form of health insurance,” Kanamugire who’s also the chief executive of MUA said.

That, he added, has increased uptake of insurance services and products.

The insurance sector fundamentally provides a valuable risk management function for both individuals and businesses by spreading risks, and its growth and performance is critical for economic growth and development.

The number of insurers reduced from 16 in December 2018 to 14 in December 2019 following the merger of Saham General Insurance and Saham Life with Sanlam General and Sanlam Life Insurance.

Growth factors

The National Bank of Rwanda (BNR) hasn’t publicly released full year results of the financial sector for 2019.

But experienced solid results in the previous year could be attributed to the correction of mistakes, as Jean Chrysostome Hodali, the Managing Director of Sanlam Life says, that were seen in the industry previously.

"The sector is now becoming stable in terms of pricing, especially motor insurance. Malpractices have reduced and insurance companies are now operating professionally,” he said.

A special report published in August last year by the World Bank painted a grim picture for the insurance industry, partly pointing to the unhealthy competition between insurers who sell a small number of traditional products.

According to the report, insurers were battling each other, often engaging in irrational price‐cutting and other behaviors, to sell the few traditional products to the same customer segment.

Hodali told this publication that actuarial studies conducted previously gave strong insights to market players, who have been implementing several recommendations given by experts.

"The studies conducted over the years informed the decision of many players. Experts told them that if you exceed this rate when pricing, you will collapse. The enforcement of those guidelines started bearing fruits last year,” he noted.

According to Hodali, growth in life insurance could be attributed to the increase in distribution channels, highlighting that their company increased channels by between 150 to 160 per cent.

"This means that we increased awareness beyond Kigali,” he said.

The insurance penetration (gross premiums as a proportion of GDP) in Rwanda remains generally low.

Gross premiums in the insurance sector in Rwanda remains around 1.6 per cent of gross domestic product (GDP).

Motor insurance (which is legally mandatory) represents one‐third of the total premiums in   Rwanda’s private insurers.  Medical insurance represents over one‐fourth of the total premiums.

Pension

Last year, the pension sector – a source of long-term funds for financing long-term investments – followed the same growth trend.

Total assets of the pension sector increased to Rwf936.5 billion in December 2019 from Rwf808.2 billion during the same period in 2018.

The sector is currently composed of one mandatory and occupational hazards scheme (RSSB), which accounts for 95 per cent of the pension total assets, as well as 12 licensed private pension schemes.

Private pension schemes account for 5 per cent of the pension total assets.