Uganda’s Insurance Sector: Key Developments and Future Prospects
Grant Thornton (Uganda)
Grant Thornton Uganda is driven by a simple ambition: to be the only choice for dynamic businesses.
The Ugandan insurance industry has witnessed transformative changes in 2023 and 2024, propelled by new regulations, technological advancements, and strategic partnerships. These developments have created a more inclusive, accessible, and dynamic insurance market, benefiting both customers and companies.
Technological Development and Innovation
The insurance sector in Uganda has experienced significant technological shift aimed at improving accessibility, affordability, and customer engagement. A notable example is the introduction of index insurance and health insurance products with added benefits. One of the pioneering developments was the launch of a low-cost hospital insurance policy with burial benefits by Kenyan Insurtech startup Turaco, in collaboration with Prudential and Airtel Money.
This initiative, introduced in March 2023, aims to expand insurance access to low-income and underserved communities. In leveraging the popular Airtel Money platform, the product simplifies insurance distribution, ensuring that families and individuals in Uganda can easily access financial protection in the event of hospitalization.
The continued digitization of the insurance sector also holds significant potential for broadening insurance coverage and improving service delivery. Digital platforms enable faster, more efficient claims processing, greater transparency, and better customer experience.
Regulatory Changes and Legal Developments
The Ugandan government and regulatory bodies have introduced several legislative amendments to strengthen the insurance industry and ensure its long-term stability.
1. Enhanced Capital and Solvency Requirements
A critical regulatory update came in the form of the Insurance (Capital Adequacy and Prudential Requirements Regulations, 2020). This regulation set minimum paid-up capital requirements for insurance and reinsurance companies to ensure financial stability. The specified capital requirements are as follows:
These measures were designed to ensure that insurers have sufficient capital buffers to cover claims and maintain solvency.
?2. Insurance Intermediaries and Commission Regulations
The Insurance (Minimum Premium and Maximum Commission Rates) Regulations, 2023 introduced notable amendments to the commission structures for insurance intermediaries. The changes were aimed at enhancing the fairness and transparency of commission payments to brokers, agents, and other intermediaries.
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Opportunities for Growth in the Insurance Sector
The ongoing developments present a range of opportunities that have the potential to shape the future of the insurance industry in Uganda, particularly in agriculture, health, and financial inclusion.
1. Agricultural Insurance
Agriculture is a vital industry in Uganda, employing a significant portion of the population. However, it faces numerous risks, including pest infestations, droughts, and flooding. To mitigate these challenges, there is substantial potential for the growth of agricultural insurance products tailored to farmers' needs. Livestock and crop insurance can help safeguard farmers' livelihoods against unpredictable climatic conditions.
Collaboration between insurers, the government, and agricultural associations is essential to create products that meet the specific needs of farmers. By doing so, Uganda can enhance agricultural resilience and contribute to long-term economic growth.
Moreover, in August 2024, the International Growth Centre (IGC), in partnership with the Ministry of Finance, Planning and Economic Development (MoFPED), hosted Uganda’s 8th?Economic Growth Forum (EGF). This forum focused on addressing climate change's impact on agriculture, and it is expected to serve as a platform for discussing policies to support agricultural insurance. Government initiatives such as subsidies, tax incentives, and regulatory support will further help foster a robust agricultural insurance market.
2. Industry Developments and Awards
On 09th December 2024, the Insurance Regulatory Authority (IRA) issued a circular to all insurance players and the media highlighting the intention to host the Insurance Innovation Awards. The event will take place on 14th March 2025 at the prestigious Serena Hotel, Kampala, under the theme "Redefining Insurance: Trust, Innovation, and Inclusivity." This event will recognize outstanding achievements in insurance innovation over the last three years, showcasing developments that promote trust and inclusivity in the industry. The awards will be presented in various categories, including:
To ensure transparency in the selection process, the IRA has engaged Adroit Consult International to manage awards. This initiative underscores the importance of innovation in the insurance sector and highlights the key role that creativity and inclusivity play in driving the industry’s evolution.
3. Risk capital and long-term insurance business
The insurance risk capital for individual long-term life and annuity businesses continues to be a critical area of focus. Insurance risks, including mortality risk, longevity risk, and morbidity risk, require careful management to ensure the financial stability of insurers.
In 2024, Ugandan insurers were expected to apply a projected cash flow methodology to measure the required capital to cover these risks. This approach is crucial for determining the necessary reserves to meet the long-term liabilities associated with life and annuity products, ensuring that insurers are well-prepared to manage their obligations effectively.
Conclusion
The insurance industry in Uganda has entered an exciting phase of growth, driven by regulatory reforms, technological advancements, and new opportunities for inclusivity. As Uganda continues to develop its insurance sector, significant strides are being made in improving accessibility, governance, and innovation. These developments not only enhance the stability and resilience of the industry but also create a more sustainable and inclusive environment for policyholders. A chance to expand the insurance sector is pivotal to increasing Uganda’s Gross Domestic Product. Remarkable opportunities include requiring fire insurance for buildings located in the urban centers, among other reforms that government can explore.