Uganda’s insurance industry could register a 50 per cent decline in premiums owing to the Covid-19 pandemic, preliminary indicators by the Insurance Regulatory Authority (IRA) have shown.
According to a report released by IRA on Tuesday, the insurance industry, like other sectors, has been battered by Covid-19 with the impact expected to be felt in the second quarter ending June.
Mr Ibrahim Kaddunabbi Lubega, the chief executive officer at IRA, said while the first quarter of 2020 registered 11 per cent growth, the effects of Covid-19 are expected to be felt in the second quarter.
“Preliminary indicators point to a decline in performance in the second quarter of up to about 50 per cent compared to the similar period in 2019. How worse or well it gets will depend on the direction the pandemic takes,” he said.
The insurance industry in the second quarter of 2019 recorded a total of Shs495.9b in gross written premiums. This means that the industry expects to lose nearly Shs248b at the end of June.
The drop in performance is attributed to a dip in uptake of new policies as many policy holders opt out of the insurance by not renewing their policies .
“The slowdown in economic activity and the near cut-off of the public’s earning potential means low disposable income and minimal allocation to insurance will affect aggregate performance this year,” he said.
Significant premiums have been generated from engineering and construction investments from both private and public have reduced.
“Public sector infrastructure investments are bound to reduce as reallocations are made to strengthen the health sector response capabilities, a number of projects that consume insurance are donor-funded and these funds are anticipated to reduce,” he said.
When Uganda and the rest of the world closed its borders, the hospitality and tourism industry was hit hard. This also indirectly affected the insurance sector.
“There are no more insurance premiums emanating from travel insurance since international travels were banned and premiums from marine insurance have dipped as the international trade has slowed down,” he said.
The regulator also says there was higher claims of pay-out for particular classes of insurance such as business interruption, workers compensation and medical, among others.
IRA expects some recovery beginning July when the new budget takes effect. There is also hope as people slowly return to work following gradual lifting of the lockdown.
“Once the discussions on the stimulus package are actualised, we expect the economy to recover, and insurance to pick up,” he said.
The demand for inclusive insurance solutions especially agricultural insurance, Mr Kaddunabbi said, is expected to grow as people look for more ways of hedging themselves against potential losses from risks such as floods, locusts, drought, among others.
Premiums underwritten from agriculture insurance under the Agriculture Insurance Consortium doubled from Shs5.2b in 2018 to Shs12.7b last year.