By Silvia Nyambura
The Insurance sector has recorded a 6.9% growth in premiums for financial year 2014. This is a major drop compared to the 31% growth rate recorded in 2013. The sector wrote premiums worth Ushs 495.9 billion up from Ushs 463 billion the previous year.
While non-life business continued to dominate the industry, the life segment grew relatively fast at a rate of 22.4% compared to 8.6% for Non-life and (17) % for HMOs. General Insurance represented 77% of total written premiums while Life and HMOs registered 13.7% and 9.3% respectively.
The Insurers total Asset base rose to Ushs 915 billion from Ushs 754 billion in 2013 (representing a 21.3% growth). This demonstrated the growing strength of companies to handle insurable risks.
The industry paid out Ushs 101.3 billion in net claims for both life and Non-life insurance. Compared to 2013’s amount of Ushs 85.5 billion, this represents a 10.7% increase.
This performance is largely attributed to changes in the operating environment that directly impacted the business. These include the lifting of VAT waiver on insurance services coupled with the upward revision of stamp duty. The Insurance Regulatory Authority (IRA) further attributes the results to modest growth in the economy, reduced exports, increased government domestic borrowing and inflation.
“Government in the 2014/2015 budget imposed VAT on all insurance services. This had an immediate impact on the demand for insurance given its high price-sensitivity nature. In addition, there was slow economic growth at 4.7% as compared to 5.1% in 2013. The effects of inflation were also apparent as the Uganda Shilling depreciated against the dollar by 12 percentage points. This prompted speculation in expectation of further depreciation and further affected business,” says IRA CEO Ibrahim Kaddunabi.
Going forward, the sector expects tough times ahead owing to a bad economic year. Uganda’s shilling has depreciated by over 40% against the dollar in the recent past. This has significantly increased the costs of doing business.
See performance highlights here: Breakdown of 2014 Insurance Industry Performance Highlights