Tanzania Investment and Consultant Group Ltd

| Economic Research Centre

The Insurance Sector in Tanzania
July 1, 2024  
The Insurance Sector in Tanzania Performance Overview: Market Dynamics: Financial Soundness Indicators: Regulatory Developments: Growth and Resilience: Insights on Tanzania's Economic Development from the Insurance Sector The performance and trends in Tanzania's insurance sector provide several important insights into the broader economic development of the country: 1. Growth and Financial Stability 2. Expanding Market and […]

The Insurance Sector in Tanzania

Performance Overview:

  • Net Worth: The insurance sector's total net worth increased from TZS 690.5 billion in 2022 to TZS 742.2 billion in 2023, showing a growth of 7.5%.
  • Investments: Total investments in the insurance sector rose by 12.7%, from TZS 1,169.7 billion to TZS 1,318.5 billion. This growth indicates stronger financial positions as assets outgrew liabilities.
  • Gross Premiums Written: The total gross premiums written, combining general and life insurance, increased by 8.9% to TZS 1,238.5 billion. Specifically, premiums for general insurance increased by 8.8% to TZS 974.0 billion, and for life insurance, they grew by 9.2% to TZS 264.5 billion​​.

Market Dynamics:

  • Digital Platforms and Bancassurance: The growth in the insurance sector was significantly driven by the use of digital insurance platforms and bancassurance. These innovations introduced new products, business channels, and expanded outreach, especially to rural areas. Consequently, motor insurance premiums rose from TZS 287.2 million to TZS 339.8 million, increasing its market share from 32.1% to 34.9%​​.

Financial Soundness Indicators:

  • Retention Ratio: The retention ratio for general insurance increased to 53.3% from 49.4% in 2022, while life insurance retained 83.3%, down slightly from 85.7% in 2022. These ratios are within the regulatory thresholds, indicating balanced risk exposure and market stability.
  • Liquidity Ratio: In 2023, the liquidity ratio for general insurers improved to 140.4% from 106.8% in 2022. For life insurers, it improved to 90.0% from 79.9% in the previous year​​.

Regulatory Developments:

  • Guidelines Issued: The Tanzania Insurance Regulatory Authority (TIRA) introduced several guidelines in 2023 to enhance industry practices and consumer protection. These included guidelines on retention and reinsurance management, accreditation of automobile repairers, and medical insurance and health service provider registration​.

Growth and Resilience:

  • The insurance subsector demonstrated robust growth and resilience. Total assets increased by 12.1% to TZS 1,870.8 billion by the end of 2023, while total liabilities rose by 10.2% to TZS 1,128.7 billion, indicating an increase in financial obligations due to higher policy payouts​​.

Insights on Tanzania's Economic Development from the Insurance Sector

The performance and trends in Tanzania's insurance sector provide several important insights into the broader economic development of the country:

1. Growth and Financial Stability

  • Increased Net Worth and Investments: The insurance sector's net worth and total investments grew significantly, indicating a strengthening financial position. This growth reflects an increase in economic activities and confidence in the financial system.
    • Net Worth Growth: From TZS 690.5 billion in 2022 to TZS 742.2 billion in 2023 (7.5% growth).
    • Investment Growth: From TZS 1,169.7 billion to TZS 1,318.5 billion (12.7% growth).

2. Expanding Market and Accessibility

  • Rising Gross Premiums: The increase in gross premiums written signifies a growing market for insurance products, driven by higher economic activity and improved public awareness.
    • Total Gross Premiums: Increased by 8.9% to TZS 1,238.5 billion.
    • General Insurance Premiums: Grew by 8.8% to TZS 974.0 billion.
    • Life Insurance Premiums: Grew by 9.2% to TZS 264.5 billion.
  • Digital Platforms and Bancassurance: The adoption of digital platforms and bancassurance expanded insurance outreach, particularly in rural areas, enhancing financial inclusion and accessibility to insurance services.
  • Motor Insurance Premiums: Increased from TZS 287.2 million to TZS 339.8 million, boosting its market share from 32.1% to 34.9%.

3. Financial Soundness and Risk Management

  • Improved Retention and Liquidity Ratios: Better retention and liquidity ratios for insurers indicate prudent risk management and financial health.
    • General Insurance Retention Ratio: Improved to 53.3% from 49.4%.
    • Life Insurance Retention Ratio: Maintained at 83.3%, slightly down from 85.7%.
    • General Insurance Liquidity Ratio: Improved to 140.4% from 106.8%.
    • Life Insurance Liquidity Ratio: Improved to 90.0% from 79.9%.

4. Regulatory Enhancements

  • New Guidelines: The Tanzania Insurance Regulatory Authority (TIRA) introduced guidelines to improve industry practices and consumer protection, fostering a stable and transparent insurance market.
    • Guidelines on retention and reinsurance management, accreditation of automobile repairers, and registration of medical insurance and health service providers were introduced.

5. Economic Resilience

  • Growth in Assets and Liabilities: The increase in total assets and liabilities of the insurance sector reflects economic resilience and the capacity to handle higher policy payouts.
    • Total Assets: Increased by 12.1% to TZS 1,870.8 billion.
    • Total Liabilities: Rose by 10.2% to TZS 1,128.7 billion.

Implications for Economic Development

  • Financial Inclusion: The expansion of digital insurance platforms and bancassurance has increased accessibility to insurance products, particularly in rural areas, contributing to financial inclusion.
  • Economic Confidence: The growth in the insurance sector suggests rising economic confidence among businesses and individuals, which is crucial for sustained economic growth.
  • Risk Mitigation: A robust insurance sector supports economic development by providing risk mitigation mechanisms for businesses and individuals, encouraging investment and economic activities.
  • Regulatory Strength: The proactive regulatory environment ensures the stability and integrity of the insurance sector, fostering a secure financial ecosystem.

The growth and development of Tanzania's insurance sector indicate positive economic development, characterized by increased financial stability, expanding market accessibility, improved risk management, and a supportive regulatory framework.

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