Small insurance firms urged to merge or sell

Kampala, Uganda | THE INDEPENDENT | The Insurance Regulatory Authority has advised smaller companies to merge with others so as to make the insurance industry stronger and better.

Uganda today has eight life insurance companies and 10 non-life insurance providers licensed, and these recorded a total of sh1.76 trillion in gross written premiums in 2024.

According to recent reports, including the 2024 annual performance report issued Thursday by IRA, three companies dominate the industry business. This means that there are many that are not performing as well as they should.

Ibrahim Lubega Kaddunabbi, the IRA Chief Executive Officer, says they encourage and expect smaller companies to merge in order to have more resources available for them to conduct better business, acquire technology, and conduct research.

The industry recorded a growth of about 10 percent in gross written premiums during the year, up from the sh1.6 trillion registered in 2023, showing a slight slowdown in the growth.

A total of 801,927 policies were registered during the year, with 685,000 being individually held policies and the other 117,376 group policies.

However, according to Haj Kaddunabbi, the chief executive officer at IRA, the people insured are many more than the policies, because a group policy covers many more than one person, while also, the motor third-party policyholders, who are estimated at half a million, are not included.

The performance is expected to be better this year, especially with the expected higher economic growth, the coming of other players, and the expected take-off of Takaful, the insurance services based on Islamic principles.

Takaful insurance is founded on a mutual co-operative principle where all contributors of the premiums are shareholders such that in case of risks against a given member, compensation is paid out from the pool such that the risk is spread and shared between members.

The process for its introduction in Uganda was commenced in 2020 and principles and regulations to enable in are now in place.

The CEO explained that Takaful, while convenient for the Muslim community, is not targeted only at them, but can be accessed by anyone irrespective of faith.

He adds that while the framework is now in place, no company is yet licensed, but one has filed an application and should commence operations before the end of this year.

Non-life insurance continues to dominate the business with 55.95 percent of the total gross written premium but this declined slightly from the 58.4 percent of the market share registered in 2023.

On the other hand, life insurance accounted for 39.79 percent, showing an increase in the market share from the 38.14 registered in the previous year.

The fastest-growing segment was the micro-insurance business, which grew from sh700 million to sh1.6 billion in 2024, as more online or digital products and channels are brought on board.

IRA hails this trend, not only for growth in premiums, but for enhancing the awareness of people about insurance, which will in turn boost insurance services deepening.

A total of sh887.46 billion was paid out in insurance claims, showing a growth from 820.47 billion in 2023.

This means 50.1 percent of the premiums collected by the insurance companies were paid out in claims, a slightly lower percentage than the 51.17 percent registered in 2023.

Kaddunabbi said the growth in claims paid out is a welcome trend and hoped that even more should be paid next year, because “we exist to pay claims to people who have incurred losses.”

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