IRA Pushes for Mergers Among Smaller Insurers to Boost Industry Resilience

The Insurance Regulatory Authority (IRA) has issued a call for consolidation within Uganda’s insurance industry, advising smaller companies to merge with others to foster a more robust and competitive landscape. This strategic directive comes as recent reports highlight a significant disparity in performance among the nation’s 18 licensed insurance providers.

Uganda currently operates with eight life insurance companies and 10 non-life insurance providers. In 2024, these companies collectively recorded a total of UGX 1.76 trillion in gross written premiums, a 10% increase from the UGX 1.6 trillion registered in 2023, though this indicates a slight slowdown in the growth rate.

Despite the overall growth, the IRA’s 2024 annual performance report, released on Thursday, reveals that just three companies dominate the industry’s business. This concentration of market share underscores the challenges faced by many smaller players who are not performing to their full potential.

Ibrahim Lubega Kaddunabbi, the IRA Chief Executive Officer, emphasised the rationale behind the merger recommendation. “We encourage and expect smaller companies to merge to have more resources available for them to conduct better business, acquire technology, and conduct research,” Kaddunabbi stated, highlighting the need for enhanced capacity and innovation within the sector.

The industry saw a total of 801,927 policies registered in 2024, with 685,000 being individually held policies and 117,376 group policies. Kaddunabbi clarified that the actual number of insured individuals far surpasses the policy count, as group policies cover multiple people, and an estimated half a million motor third-party policyholders are not included in these figures.

Looking ahead, the IRA anticipates a stronger performance in the current year, driven by expected higher economic growth, the entry of new players, and the highly anticipated take-off of Takaful insurance services.

Takaful: A New Era for Inclusive Insurance

Takaful, an insurance model based on Islamic principles, is poised to revolutionize the Ugandan market. Founded on a mutual cooperative principle, Takaful involves contributors pooling premiums, from which compensation is paid out to members who incur risks, effectively spreading and sharing the risk among participants.

The process for introducing Takaful in Uganda commenced in 2020, and the necessary principles and regulations are now firmly in place. Kaddunabbi clarified that while Takaful is inherently convenient for the Muslim community, it is designed to be accessible to anyone, irrespective of their faith.

He confirmed that while no company is yet licensed to offer Takaful services, one application has been filed and operations are expected to commence before the end of this year, marking a significant step towards a more inclusive insurance landscape.

Sectoral Performance and Growth Areas

Non-life insurance continues to hold the largest share of the business, accounting for 55.95% of the total gross written premiums in 2024. However, this represents a slight decline from its 58.4% market share in 2023. Conversely, life insurance demonstrated growth, increasing its market share to 39.79% from 38.14% in the previous year.

The micro-insurance business emerged as the fastest-growing segment, surging from UGX 700 million to UGX 1.6 billion in 2024. This remarkable growth is attributed to the increasing adoption of online and digital products and channels, which the IRA commends for not only boosting premiums but also for enhancing public awareness about insurance services. This trend is expected to contribute significantly to the deepening of insurance penetration in Uganda.

In 2024, a total of UGX 887.46 billion was paid out in insurance claims, up from UGX 820.47 billion in 2023. This means that 50.1% of the premiums collected by insurance companies were paid out in claims, a slight decrease from the 51.17% registered in 2023.

Kaddunabbi welcomed the growth in claims paid out, expressing hope for an even higher figure next year. “We exist to pay claims to people who have incurred losses,” he affirmed, reiterating the fundamental purpose of the insurance industry in providing essential financial protection to the public.