- Regulator seeking to strengthen industry as risks increase
- Lloyds of London applies for operating license, Kamuzora says
Tanzania is encouraging mergers and acquisitions among insurers in a bid to strengthen the industry so that it can cope with increased risks from the fledgling oil and gas sector, a government official said.
The East Africa nation has already started tapping an estimated 58 trillion cubic feet of natural gas from offshore fields for domestic use, and is also exploring for oil in Lake Tanganyika in the west. The discoveries may spur further gains in the economy, which is expanding about 7 percent a year, and boost the construction industry, where growth has averaged almost 12 percent over the past decade, according to Bloomberg Intelligence analyst Sonia Baldeira.
A draft policy for insurers, which will increase the amount of cash companies need to set aside as reserves, should be ready in October, and the new rules in place by early 2017, Tanzanian Commissioner of Insurance, Israel Kamuzora, said in an interview in the commercial capital, Dar es Salaam, on May 27. Insurers and re-insurers are required to hold 2 billion shillings ($912,825) and 5 billion shillings in minimum share capital respectively.
“We are now talking about huge risks, especially after the extractive industry has shown a lot of potential,” he said. “So we are talking about increasing our capitalization at all levels.”
Lloyd’s of London, the world’s oldest insurance market, is seeking an operating license, Kamuzora said, underlining foreign investors’ interest in the industry. Many of Tanzania’s 30 insurance companies have limited underwriting capacity to shoulder the rising risks, which is why authorities are encouraging consolidation, he said.
Sanlam Ltd., the largest Africa-based insurer, bought 49 percent of Tanzania’s NIKO in 2014, while Kenya’s Britam Holdings Ltd. began operations in the neighboring country this month after acquiring Real Insurance Co.’s businesses. Other Kenyan insurers in Tanzania include the local units of Jubilee Holdings Ltd., UAP Holdings Ltd and Resolution Insurance Co. Ltd.
“We know those that are coming from South Africa are much larger and have bigger capacity, and it’s easy for us to ask them to increase their levels,” Kamuzora said. “We want them to retain more business in the country.”
Insurance accounts for about 1 percent of Tanzania’s $48 billion economy. Total premiums increased 18 percent to 700 billion shillings in 2015, driven by medical cover and new oil and gas projects, Kamuzora said. Authorities target annual premium growth of as much as 20 percent.
The new regulations will encourage micro-insurance as the government seeks to increase coverage for low-income earners, while also creating rules to govern Islamic insurance known as Takaful, he said.