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Uganda National Social Security Fund (NSSF), the largest non-bank financial institution in Uganda, will become the biggest shareholder when the new re-insurance company, Uganda Re, is finally created.
The acquisition of a majority stake in Uganda Re will widen the fund’s footprint in different companies; it is already the largest player on the Uganda Securities Exchange. The Insurance Regulatory Authority (IRA) intends to get the Uganda Re, a local reinsurance company, off the ground by the end of the year.
The company will attempt to reinsure local players. Under the amendment that brought the IRA into force, the regulator is supposed to form a national re-insurance company.
IRA Chief Executive Officer Ibrahim Kaddunabbi Lubega said all insurance companies will be mandated to cede at least 15% of their insurance towards Uganda Re. Just last year, local companies invested Shs 80bn in foreign re-insurers. Kaddunabbi expects that as the company grows, more of that money will stay in the country. “There is a range of investments that they can invest in, from securities to real estate to stakes in successful companies.
So, we anticipate that Uganda Re will be profitable enough to give insurers a healthier return on their investment,” he added.
Currently insurers are investing a portion of their short-term assets in real estate and securities while sending the rest to foreign firms. However, since the law requires that Uganda Re should take on a national character, the IRA has partnered with NSSF, which will have a 56% stake in the company.
NSSF is expected to invest Shs 5bn for its stake, while the rest of the insurance companies will take up 27% or Shs 2.4bn of the company’s total share capital of Shs 9bn. Brokers and assessors have been offered 5%. International player Baobab Re has been offered 5%, while regional insurers PTA Re and Zep Re have been given 4%. Existing shareholders like IRA and Insurers Association will take up 3%, although NSSF will snap this up if the stake is not taken.
Kaddunabbi said government would not have any control over Uganda Re. “This company will be purely privately run and the IRA is only there to ensure due diligence, so that the money invested is safeguarded. It doesn’t even sit on the board,” he said.
Efforts to get Uganda Re up and running have been ongoing for at least a decade. However, little government appreciation of insurance products has stood in the way of such efforts ever since. The current plans offer the strongest indication so far that Uganda Re could finally become a reality.
By Moses Talemwa
The Observer Newspaper
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