Insurance Sector assets grow at 13%

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Rwanda Insurance

Insurance, the country’s fragile sector registered an impressive growth outlook in the first halfof the year, bringing optimism that the sector would recoverfrom the poor perfomance registered in the past years.

According to Central Bank statistics, the sector’s total assets grew by 13 percent thus improvingits liquidity positionwhile capital grew by 15% and gross premiums by 14% compared to the first half of 2013.

The ratio of current assets over current liabilities that determines the liquidityposition grew positively to 368% by the end ofJune this year up from 308% in the same period under review last year.

Despite the perfomance, the sector that has seen more players joining thus increasing options for consumers is still struggling to raise its profitability aftera decline in the first half of the year.

The sector failed   to register profitability as net profit declined by 11percent something central bank attributes to newentrants who brought in more assets but did not generate revenuereturns fromthe operations.

“The decline is as a result of new players who entered the market in the mid 2013 with more injection of equity and assets but had not yet generated significant revenues from their operations,” John Rwangombwa, Governeor of Central Bank noted.

Moreover, with the rush to take up market share, insurance companies opted for price undercutting which  saw most of the  companies with no option  but to choke with  underwriting losses  mainly on short term  insurance products.

“Following  the  motor Insurance  study  done by the ActServ last year, the National  bank of Rwanda  worked with  the  Insurers’  association(ASSAR) to ensure that the  2008 agreed 2 minimum motor insurance tariff are complied with,”  he noted

But the fragile sector is still dogged by several challenges according to experts which hamper its growth such as less innovation in product development and high operating costs.

This therefore pushes the sector  to a tight corner of  decreasing profitability since the products development  are less relevant to the needs of consumers which in turn  lowers public participation.

“BNR will continue to encourage insurers to develop products which are aligned with the customers’ needs such as micro insurance products,” said Dr. Frank Kigabo, Senior economist at Central Bank.

Experts believe  that  the micro  products  such as micro-loans insurance, agriculture and weather index insurance which are  untapped by  insurance companies as well ensuring  that the policyholders rights are well safeguarded through clear contractual terms and conditions would  boost the sector’s perfomance outlook.

However, they also say that the sector needs to tap into  the latest  innovative  telecommunication technologiesso as to  effectively  make available their  products to  consumers, something that  saw the banking sector register an upward growth for the past years.


About the author

Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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