New Vision (Kampala)

By Charles Bwogi
Kampala

FOREIGN insurance firms are looking at Uganda, eastern DR Congo and southern Sudan as the next growth area due to untapped potential.

Insurance is one of the key sectors in the financial industry. Others are banking and the capital markets.

Mathew Koech, the United Assurance managing director, said recently that Uganda had become a strategic destination for insurance giants to tap into the unexploited neighbouring markets.

The companies are looking at Uganda as the launch pad, targeting mainly hundreds of NGOs operating there and the booming reconstruction work and businesses, following relative peace currently being enjoyed.

Potential insurance products include risk insurance, investment insurance, medical insurance and travel insurance.

Others are the aviation covers for the big and small planes plying the region.

"We are critically looking at Entebbe as a regional hub for business and air traffic going into eastern DRC and southern Sudan as calm gets back into those areas," said Suresh Kumar, whose company, Phoenix Assurance of East Africa, mainly dealing in aviation and marine insurance, wrote over sh3b in 2004 during its first year of operation in Uganda.

Kumar said since a considerable amount of business into the two countries goes through Uganda and was insurable in Uganda, it was plausible to have a grip on the local insurance market.

The coming of foreign companies has seen the gross premium written more than double from sh39b in 2000 to sh84.4b in 2004.

For years, due to negative attitude the public had about the insurance industry resulting from unprofessional conduct by some players and the 1987 currency reform that saw many clients lose money on life insurance products and lack of suitable products, the growth of the industry had stagnated.

With Kenyan and southern Africa's markets getting saturated, several insurance companies are focusing on Uganda and its neighbours, who on average still have a market penetration percentage of less than 1%.

Uganda has many areas that have not been fully exploited by insurance.

These include farming, education, health and business policies mainly targeting informal businesses, which have emerged potential areas of growth.

In terms of penetration, total insurance premiums in Kenya were 3.1% of GDP in 2003 but further analysis showed that at 2.3% of GDP, general insurance premiums in Kenya were near optimal penetration levels compared to 2.8% in South Africa which is a more developed market. Uganda's insurance premium contribution to GDP is the lowest in the region at only 0.6% by 2004.

Over the last three years, several insurance giants from Kenya and southern Africa have ventured into the Ugandan market due to its huge market potential.

In October 2004, UAP Provincial Insurance, the number three player in Kenya, acquired a 51% in United Assurance.

This came shortly after two other giant Kenyan players, Phoenix Assurance of East Africa and Insurance Company of East Africa had set foot in the local market.

From southern Africa, several players including Lion Assurance from Zimbabwe, NICO Holding and First Insurance Company from Malawi are already here.

Others are Nigeria's Industrial and General Insurance, which recently acquired majority stake in National Insurance Corporation.

Frederick Magezi, the insurance commissioner, said the arrival of foreign players was a positive trend that would lead to more innovative products and skills development because the newcomers bring in professional practice that has been lacking.

Uganda has less than five native professional insurance practitioners.