The National Bank of Rwanda has suspended licensing new insurance companies until further notice, to maintain financial stability.
“Considering the need to streamline the insurance sector to strengthen the financial stability and soundness, the NBR informs the public that it has with immediate effect placed moratorium to the licensing of new insurance companies until further notice,” reads part of the communiqué.
However, the notice does not apply to usual activities conducted into existing insurance companies including opening new branches, approval of new products and services, transfer and purchase of shares, acquisition, takeovers and fusion.
Private companies willing to register as pension providers are not affected by this announcement.
A law of September 2016 liberalized this service so far provided by a sole government institution, Rwanda Social Security Board (RSSB).
“The notice is not applied to the pension scheme but only insurance companies,” Bonaventure Sangano, the Head of insurance companies at Central Bank of Rwanda told KT Press.
According to Sangano, the size of private insurance companies does not match with their productivity.
Insurance sector’s contribution to the national economy is not promising.
Currently there are 15 insurance companies licensed of which only 2 public companies, compared to 10 commercial banks.
“The number of insurance companies equals to number of commercial banks but their contribution to financial sector is still low,” Sangano said, adding that this is because Rwandans prefer public to private insurers.
According to the monetary policy and financial stability statement published on February 22, demand deposits of insurance companies in banks declined from Rwf 23.8 billion to Rwf 17.7 billion in 2015 and 2016 respectively.
However, by end of December 2016, total assets of the insurance sector had increased by 13.7% to Rwf 346.8 billion, higher than the 12% growth registered in 2015 as a result of new capital injections made by some insurance companies in the last quarter of 2016.
Private insurers assets increased by 16% to Rwf 134 billion in December 2016 against 6.5% registered in 2015 due to a total of Rwf 6.7 billion as fresh capital injected by private insures in 2016.
On the other hand, public insurers (RSSB and MMI) assets grew by 12% in 2016 mainly due to good profitability recorded during the year under review (Annual Profit: Rwf 29 billion), compared to 16.4% growth registered in 2015.