on December 31, 2011 by admin in Insurance Industry, Comments (0)

Tanzania: Insurance Industry in Superb Performance

Tanzania Daily News (Dar es Salaam)

John Kulekana

29 December 2011

Despite various social and economic challenges over the couple of years, including rising inflation, chronic power blues, frequent accidents on the roads and sea, as well as cases of fire, Tanzania's insurance industry has maintained a robust growth.

According to the Tanzania Insurance Regulatory Authority (TIRA), there were 26 insurers licensed to conduct general and life insurance business in the country, as of June 30, 2011. Of these, 21 are general insurers, two life insurers and three composite companies -- operating both life and general insurers.

There is also one re-insurance firm, the Tanzania National Reinsurance Corporation Limited (TAN-RE). The Commissioner of Insurance, Mr Israel Kamuzora, told the 'Daily News' recently that the market grew by 20 per cent in gross premiums during the nine months period to September 30, 2011, compared to a similar period of the previous year.

Mr Kamuzora also noted that investment Income for the market grew by a whooping 111 per cent during the nine months period to September 30, 2011 compared to same period the previous year.

On the country's economic scenario, year-on-year inflation rate rose for the 13th straight month to 19.2 per cent in November from 17.9 per cent in October, the National Bureau of Statistics (NBS) said in its monthly report earlier this month.

NBS said food and fuel price rises have been driving the year-on-year inflation rate higher in Tanzania, the second-largest economy in the East African Community (EAC), after Kenya. Other EAC member states are Burundi, Rwanda and Uganda.

"The annual headline inflation rate for the year ended November 2011 has further increased to 19.2 per cent compared to 17.9 per cent recorded in the year ended October 2011," according the NBS statement published on its website www.nbs.go.tz.

"Food and non-alcoholic beverages inflation rate increased to 26.1 per cent in November 2011 from 24 per cent recorded in the year ended October 2011." Food and non-alcoholic beverages have a 47.8 per cent weighting in the country's National Consumer Price Index (NCPI) -- the basket of goods used to measure inflation.

Maize, rice, bread, wheat flour, cassava, meat, oil, Irish potatoes, sweet potatoes and sugar are among items that registered increased prices during the period under review. NBS said the year-on-year inflation rate for energy rose to 39.2 per cent in November from 37.4 per cent in October.

Meanwhile, there are reports that the state-run power company, TANESCO, is seeking an emergency 155 per cent price rise from next Sunday (January 1), as the country has been experiencing a crippling power crisis for the past five years.

TANESCO and other government officials attribute power crisis to a plethora of factors including drought, depreciation of the Tanzanian shilling and ageing machinery and equipment. The country has been battered by relentless power rationing for a large part of 2010 and 2011, forcing some factories to close production lines or opt for electricity generators to remain in business.

The International Monetary Fund (IMF) cut its 2011 growth forecast to 6.0 per cent from 7.2 per cent in March, saying frequent power outages would hurt output while food and fuel prices could push inflation even higher.

The value of the shilling has been nosediving since early 2010, making imports more expensive. Increased oil imports for power generation are also driving up demand for foreign currency, especially the US dollar which in early November reached more than 1,800/- for the US currency.

However, the central bank reacted and pumped in dollars to reverse the trend. It also adopted tight monetary measures to check excess liquidity and in the economy. The government has also implementing plans to spend over 1.2 trillion/- by the end of next year on various emergency and medium term power projects to ease the crises.

China's Sichuan Hongda Limited recently signed a $3 billion deal with Tanzania to mine coal and iron ore in Liganga and Mchuchuma. The two countries also signed a $1 billion loan agreement to build a major natural gas pipeline.

TIRA notes that gross premiums written for general insurance business in nine months to September 2011 was 229bn/- compared to 193bn/- during a similar period last year. Net incurred claims were 60.7bn/- for the nine months period to September 2011, up from 50bn/- in the same period last year.

Underwriting expenses for general insurance business in the period to September 30, 2011 was 109.6bn/- from 87.1bn/- of same period last year. It adds that general insurance business made an underwriting income loss of 3.9bn/- in the nine months period to September 30, 2011.

Gross premiums written for life insurance business in the nine months period to September 30, 2011 was 27.9bn/- from 21.7bn/- of same period. Policyholders benefits paid were 9.79bn/- for the nine months period to September 30, 2011 from 9.17bn/- for a similar period last year.

Underwriting expenses for life insurance business in the nine months period to September 30, 2011 were 12.1bn/- from 6.4bn/- for a similar nine months period last year. Investment income for life insurance business in the nine months period to September 30, 2011, was 7.53bn/- up from 1.97bn/- for similar nine months period last year.

TIRA says the total assets for the industry were 401bn/- as at September 30, 2011, an increase from 356bn/- as at December 31, 2010, while industry total liabilities were 283bn/- as at September 30, 2011 compared to 247bn/- as at December 31, 2010.

It further points out that the largest share of insurers' investment assets comprised bank deposits (47 per cent), followed by real estates investments (19 per cent), government Securities (12 per cent), investments in related parties (9 per cent), shares (8 per cent) and other financial investments (5 per cent).

Mr Kamuzora says among the highlists of the insurance industry in 2011, include extension of insurance services and regulatory capacity in the market. "One of TIRA's Corporate Plan 2009-2014 objectives, is to extend insurance regulatory services closer to the public. In January 2011, two TIRA zonal offices were established to extend the Authority's operations in the Lake and Northern zones.

"TIRA's Lake zone office is located on 5th Floor, PPF House, Kenyatta Road, Mwanza and is responsible for six regions namely, Mwanza, Musoma, Kagera, Kigoma, Shinyanga and Geita," he said in an interview. He said TIRA's Northern zone office is housed in PPF Olorien Commercial Centre, Njiro area in Arusha. The office is responsible for Arusha, Kilimanjaro, Manyara, and Tanga regions.

The main activities of the zonal offices include processing applications for registration within zones, carrying out inspection within zonal area, conducting public education and market sensitization campaigns within a zone and handling complaints from insurance customers and the general public.

TIRA office in Zanzibar was officially opened on April 20, 2011 at an event that was officiated by Zanzibar President, Dr Ali Mohamed Shein. In his key note address, Dr Shein commended TIRA for its achievements in the industry since its liberalisation in 1996, but also in terms of regulation and supervision.

He expressed concern over low level of awareness of the public on the essence of insurance services and urged industry stakeholders to make concerted efforts to enhance public education on insurance. He also observed that insurance services are concentrated in urban areas, with rural areas of the country remaining barely reached by insurance practitioners.

He called upon insurance registrants to extend their services to rural areas, including medical insurance, life insurance and crop insurance are among insurance products that should be considered for rural areas.

Mr Kamuzora also noted that TIRA is cognizant of the shortage of qualified human resource in respect of professions required in the industry including actuaries and insurers. "The Authority has continued to collaborate with various training institutions including the Institute of Finance Management (IFM), University of Dar es Salaam, to ensure delivery of training in the relevant fields.

"UDSM has enrolled 25 students to pursue a first degree course in actuarial science in 2011. TIRA in collaboration with the Institute of Finance Management (IFM) conducted a short course on Insurance in Zanzibar where 37 students were awarded Certificate of Proficiency in Insurance (COP)," he said.

In 2011, a big claim was reported following the capsizing of Mv. Spice Islanders, a ferry plying between Zanzibar and Pemba in the Isles. In this tragedy an estimated 1,000 people lost their lives and others were badly injured. Tanzania Insurers in collaboration with foreign based reinsurers have resolved to settle all claims of deaths and injuries on humanitarian grounds, according to Mr Kamuzora, the liability is about 500m/-.

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