Insurers need a basic $1m to operate in Uganda

March 10, 2017 in Business, Finance, Financial Services, Policy by Editor

March 10–Parliament has passed the Insurance Amendment Bill (2016) that has adjusted paid-up capital requirements sharply upwards before the business can be cleared to operate in Uganda.

Other clauses refer to the Insurance Act which have been dropped, adjusted, added and or replaced. “The Insurance Amendment does not mean the Insurance Act that this House passed some years back has become irrelevant. But we seek to address the existing loopholes that exist in the sector and were not legislated upon in the Insurance Act as well as embrace new dynamics in the insurance sector in this new piece of legislation,” Henry Musasizi, the Chairperson, Parliament’s Finance Committee said.

According to legislators, the amendment will boost growth, competitiveness, and legitimacy of the insurance industry in Uganda. Key is the requirement that an insurance company has to raise UGX4 billion (about $1.1 million) in paid up capital before it can be cleared and issued a license as a life or non-life insurer.

Previously under the Insurance Act, an insurer was required to raise UGX200 million (slightly over $55,000) as paid-up capital to get a license as a life or non-life insurer. Another key highlight is a clause that requires individual or groups that want to operate reinsurance business in Uganda to raise a minimum capital of UGX10 billion ($2.7 million).  Previously, this was UGX500 million.

However, some legislastors were openly sceptical  and suggested that the Bill be passed, but enforcement delayed by five years.  Critics outside Parliament are already wondering about the sharp hike in capital requirements and how it will affect the local firms. It is felt a transition period should also be provided for or the industry will see several companies exit the market which is relatively lean compared to the rest of East Africa. However some legislators felt the industry needed firmer provisions so that those involved with it, take it more seriously.

 

Musasizi said for example, among other loopholes which exist within the insurance sector in Uganda is the fact that insurance companies have continued to employ none professionals. “Honourable members I would like to inform the House, insurance companies have continued to employ non-professionals and in the Insurance Amendment Bill seeks to address this challenge,” Musasizi said.

Mwesigwa Rukutana, the Deputy Attorney General said, “Members, I think we should decide on what we want to do. You cannot pass a legislation and defer its implementation to five years from now. Let us pass these laws bearing in mind that tomorrow someone can go to court and these laws will be used to resolve any such a dispute,” Mwesigwa said.