By Ronnie Wonder
Just one year after launch, Uganda’s first reinsurance company has raked in Ushs 14.9 billion in premiums and posted a profit of Ushs 159 million-an indicator that the future of Uganda’s first and only re-insure is bright. The CEO Magazine spoke to Haroon Motara the Chief Executive Officer, Uganda Re about the current performance of the company and the achievements made so far.
It is now about a year since you opened up shop. How is the going so far?
As at year ended 31 December, 2014 Uganda Re’s gross written premium income tipped Ushs 14.9 billion representing a growth of 2244% over 2013.
A profit after tax of Ushs 159 million reflecting a 209 % growth over the previous year was achieved.
The company successfully raised the required level of minimum paid up capital of Ushs 10 billion, issued share capital of Ushs 10.1 billion and authorized share capital increased to 125 billion.
Like any start up we had our fair share of challenges like securing facilities and training staff to fit with in re- insurance industry requirements. Other than me the CEO all other staff are Ugandans meaning we have build both the financial and human capacity.
‘’We are now at full capacity and have identified a Ugandan to take on the mantle when my contract expires’’, say a cheerful Haroon
Local insurers used to release almost half of the total premiums collected over (Shs40 billion) to foreign re-insurers annually. This money would now be invested here, a move widely expected to expand the job market, the revenue base and boost the insurance industry as a whole.
The development was deemed to secure a nod of confidence in local insurers from the government to insure its many assets that are currently uninsured.
How is the situation now? Is there any departure from the past?
The reinsurance business is steadily growing in Uganda only a year old now and we have reinsurance funds invested locally (capital and surplus) of 17.5 billion stashed in Uganda’s local banks- money is retained in the country to aid in private and public investments.
Many firms have not been getting reinsurance cover because of a small market for business, arbitrary pricing and poor claim behaviour much to the advantage of foreign players in Uganda. Hitherto, penetration had stalled at 0.65% for over five years, and is now about 0.85%.
Uganda Re’s offices on Coppice Road, Kololo
Doesn’t this affect your business operations?
We work in partnership with other insurance players but we obtain business from their operations. However small these may be owing to market forces, we are positioned to provide them with reinsurance and risk management services in real time.
Generally, the insurance industry in Uganda has not embraced Information ad Communication Technologies (ICT) to the detriment of the industry’s growth in Uganda.
What is the situation at Uganda Re in this regard?
We have sourced and installed state of the art software to help us in our operation and its being tested for perfection. We are embracing ICT tools.
To boost your capacity to effectively handle local businesses, all industry players are required to reinsure at least 15 per cent of their business with you. What would happen incase local insurers failed to cede this percentage to you? Do you have a recourse or re-assurance this will be remitted?
The rules and regulations for all insurance players as laid down by the Insurance Regulatory Authority of Uganda (IRA) lay bear the requirements for all so they can’t object or default on this requirement lest they fail the insurance services chain altogether. Its a legal requirement that must be adhered to.
Recently, the Karuma Hydro power contractor, the Chinese Sino hydro proposed to source the Contractors All Risk policy from China-Re or other insurers of global repute. This proposal goes against national policy that requires all national projects to be insured with Uganda–Re as a way of reducing capital flight and helping deepen the domestic financial system.
While construction of the power station and associated tunneling works is going on, Sino hydro has not paid any premiums. The standoff means that component of the project is not insured and Uganda could lose in the event of a catastrophe.
It is understood that the contractor, fearful that the local insurance industry may default in the event of a claim, has in verbal discussions with Ugandan officials asked the government to give a written commitment that it will assume the risk in the event of default.
What is your comment on this scenario? Besides, can Uganda accommodate another Re-insurance company?
There’s no shortage of insurance and reinsurance capacity. The market is strong and resilient. If any thing the market is just not enough absorb the pool of funds available.
In this engagement, UAP insurance and Pan Africa Re is the re- insurer. Local companies and Uganda Re are credible institutions well regulated by IRA.
In any case, an understanding can be reached where UAP could cede a portion of the reinsurance premium to China Re or any other reinsurance company in respect of this transaction. Foreign contractor should hold local instructions in high regard if they are transacting business in good spirit.
Uganda Re and the regional re-insurers Zap Re and Pan Africa Re, among others have the capacity to handle any risk from the massive infrastructure investments in the offing.
‘’Competition is healthy. Uganda can have another reinsurance player from the region’’.
Nyambura is a senior journalist based in Kampala