Reinsurance refers to the practice of insurers transferring portions of risk portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. It is a practice aimed at reducing the risks associated with underwritten policies by spreading risks across alternative institutions.
Ideally, reinsurance companies receive part of the money generated from a shared risk. Previously, Insurance companies in Uganda ceded their risks to regional and international insurers as well as shared risks among themselves.
However, in May, 2013, a national Reinsurance company Uganda Re, was launched and as a result, companies were required to cede 15 percent of their reinsurance business to the company.
In 2012 alone, the industry lost US$ 242 million in reinsurance outside the country and while compulsory cessions may not be a wholesome solution to these losses, they will go a long way in reducing capital flight.
Building Wealth; Five Ugandan Entrepreneurs Democratizing Access to Investments.Samson Muwanguzi, the Chairman Uganda Re says the move to have a national reinsurer will play an effective role in balancing the fluctuations in insurance companies’ financial results as well as assist the market in building risk capacity and retention of premium.
On why it has taken so long to set up a national reinsurance company, Deepak Pandey, the Chairman Uganda Insurance Association (UIA) and CEO Jubilee Insurance Uganda says it has taken 17 years to implement the company, an initiative that is a collective effort floated by the insurance companies themselves.
“Most of the reinsurance companies in the region in Kenya and Tanzania are government initiatives, but in the case of Uganda the insurance companies came together to form the company. As we speak, 14 out of the 22 registered insurance companies in Uganda are shareholders in Uganda Re,
