A report from the Insurance Regulatory Authority shows that in the first two quarters of 2016, the non-life segment performed poorly compared to the same period in 2015.
According to the report, which analyses performance of the industry players in the insurance business and examines recent developments that have impacted growth, about 15 insurance companies failed to beat their target of the amount of premiums they wanted to underwrite.
According to the chief executive officer of IRA, Ibrahim Kaddunabbi Lubega, insurers have reportedly struggled with increasing profitability due to a “sluggish” business environment.
“The key observation is that 15 [insurance] companies are underwriting between Shs 1bn and Shs 20bn, which is not enough [performance]. Entities need to improve if we are to change the way we are doing business,” Kaddunabbi said while presenting the industry quarterly report at Serena hotel recently.
Kaddunabbi added: “Gross written premiums (GWP) for non-life is Shs 250bn, which is about 54 per cent of what was underwritten in 2015. For life, we had Shs 60bn, which is about 60 per cent of what was underwritten in 2015.”
The first two quarters of 2016, the report indicates, had premiums totaling Shs 310bn, lower than what was underwritten during the same period in 2015. A 2015 report on the sector shows that non-life business had continued to dominate with 75.87 per cent of the total industry premiums.
The report attributes the moderate growth to the recent election shocks, the volatility of the shilling, a strong buildup of bad debts, and the crisis currently experienced in South Sudan.
WEAK ACTIVITY
“The growth in private sector credit, an important variable into the insurance demand function, continued to slow down in 2016,” Kaddunabbi said. “Bad loans heightened the risks aversion in banks and [contributed to] relatively weak economic activity,” he added.
Jubilee insurance continues to dominate the non-life insurance segment, collecting more than Shs 70bn in premiums in the quarters under review. UAP insurance came second when it collected more than Shs 40bn, followed by AIG insurance with just over Shs 20bn. AIG announced that it was ceasing operations in Uganda.
On the life insurance segment, Liberty Life insurance took the lead, collecting over Shs 20bn, followed by UAP and Sanlam insurance at over Shs 12bn and Shs 10bn respectively.
Kadunnabbi attributed the low performance to high expenses such as staff salaries. According to the report, Rio, CIC General and Nova insurance companies have the highest management expenses.