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IRA’s strategic merger focus in the insurance sector

IRA’s strategic merger focus in the insurance sector

Ibrahim Kaddunabbi, the CEO of IRA, emphasizes the need for strategic mergers and acquisitions to foster a sustainable insurance landscape. (Courtesy photo)

The Insurance Regulatory Authority (IRA) has highlighted a concerning concentration of insurance business among a handful of companies in Uganda, with just five firms responsible for over 60% of the sector’s activities. In a recent address during the 59th meeting focusing on sector performance and prospects for 2024, Mr. Ibrahim Kaddunabbi, the CEO of IRA, emphasized the necessity for strategic mergers and acquisitions to foster a sustainable insurance landscape.

Kaddunabbi stressed that while the top-tier companies dominate the market, smaller insurers struggle to make significant contributions, with the bottom 10 firms collectively comprising a mere 17% share. This observation underscores the potential benefits of consolidation through mergers, enabling enhanced capacity and efficiency.

While specific details regarding the leading and lagging contributors to premiums were not disclosed, the sector currently accommodates approximately 30 insurance entities, following the division of life and non-life insurance into distinct entities.

In terms of financial performance, gross written premiums exhibited growth from Shs1.44 trillion in 2022 to Shs1.6 trillion by December 2023, reflecting an 11% expansion. Non-life insurance emerged as the primary revenue generator, witnessing a 4% increase to Shs934.5 billion, while life insurance experienced more substantial growth at 21%, reaching Shs606.6 billion.

Despite overall growth, micro-insurance faced an 8% decline in premiums, falling from Shs611.3 million to Shs559.7 million. This decline raises concerns about access to insurance services among low-income earners, prompting regulatory efforts to bolster this segment through supportive measures and incentives.

Looking ahead, the insurance sector anticipates further growth, buoyed by economic recovery from the disruptions caused by the COVID-19 pandemic.

Favorable macroeconomic indicators, including projected improvements in the economy and inflation rates below the Bank of Uganda’s target, bode well for the industry’s prospects.

Additionally, the impending implementation of the National Insurance Health Scheme promises to further stimulate growth and accessibility within the sector in 2024.

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