Penetration Rate of Life Insurance Segment Decreased to 0.12% in 2012 in Rwanda, Claims Timetric08 May 2013 • by Natalie Aster
The Rwandan insurance industry declined in terms of written premium value at a CAGR of -1.0% during the review period. The decrease was a direct consequence of the global financial crisis in 2009. In light of this, the written premium value of the industry declined by -36.7% in 2009 over figures from 2008. However, the industry recovered and posted robust growth in subsequent years. This was attributed to economic development following the global financial crisis, the market entry of new businesses and the improved performance of the non-life segment, which registered a CAGR of 3.3% during the review period. The industry is projected to grow at a CAGR of 8.0% over the forecast period. This will be driven by robust levels of economic development and government support, which will attract investor and regulatory interest, increasing insurance penetration rates through the implementation of compulsory insurance provisions.
In order to restructure and increase insurance penetration rates, The National Bank of Rwanda enacted a number of new laws in 2009. The new laws included the establishment of proper licensing procedures for insurance intermediaries, laws to monitor insurers’ financial positions and an increase in minimum capital and solvency margins. In addition, the The National Bank of Rwanda (BNR) also enforced several laws to attract new businesses under compulsory insurance provisions such as professional insurance indemnity and insurance cover for civil servants and construction site workers. The new set of regulations helped the industry increase penetration rates.
According to the report “The Insurance Industry in Rwanda, Key Trends and Opportunities to 2017” by Timetric, the penetration rate of Rwanda’s life insurance segment decreased from 0.33% in 2008 to 0.12% in 2012. The penetration of non-life insurance segment as a percentage of GDP decreased from 0.53% in 2008 to 0.37% in 2012, while the personal accident and health insurance segment declined from 0.11% in 2008 to 0.08% in 2012. The insurance industry’s growth was not in line with the country’s GDP growth, which affected insurance penetration rates during the review period. In addition, the insurance industry’s penetration rate as a percentage of GDP stood at 0.57% in 2012; this still remains very low compared with the East African average which stood at approximately 3%, suggesting further opportunities for growth potential.
The Insurance Industry in Rwanda, Key Trends and Opportunities to 2017
Published: March, 2013
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The unfavorable regulatory framework in Rwanda decelerates the demand for insurance. For example, Rwanda applies 18% VAT on insurance premiums, while other East African Community (EAC) member countries do not. This suggests that one cannot purchase insurance products, if one does not have the adequate capital. Furthermore, Rwanda applies compulsory insurance provisions for health insurance for civil servants and third-party motor vehicle insurance. Other African countries such as the Central African Republic and Cameroon apply compulsory provisions for motor third-party liability, marine cargo imports professional indemnity insurance for auctioneers, professional indemnity insurance for bailiffs and third-party insurance for importers of oil products. This unfavorable regulatory framework decelerated the demand for insurance products in Rwanda during the review period.
More information can be found in the report “The Insurance Industry in Rwanda, Key Trends and Opportunities to 2017” by Timetric.
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