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AAR to exit Rwanda in 2012 citing low business

Sunday May 29 2011
aar

Evacuating a patient. Picture: File

Kenya-based private healthcare provider Africa Air Rescue (AAR) has closed its operations in Rwanda, as the country’s new capital requirements take root.

The firm said the Kigali business has been struggling since 2009 when the capital markets regulator revised upwards the capital requirements for insurance companies from Rwf100 million ($168,900) to Rwf1.5 billion ($2.5m).

“We explored all options but unfortunately it became clear that our business was no longer viable. This was because unlike other insurance companies in the Rwandan market who write other classes of insurance risk, AAR only underwrites medical insurance which is just a component of the entire industry premiums,” said AAR’s chief executive Jagi Gakunju in a statement.

The company said the capital increment reduces the scope for growth of its business and therefore does not justify the increased level of capital.

As a result, the company will not be renewing clients’ cover and has informed the regulator that it will exit in February 2012 when its obligations expire.

But according to BNR, the new regulations seek to ensure that players in the industry conduct their operations according to international standards.

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Insurance business in Rwanda is divided into two categories — short- and long-term insurance where under each are a number of insurance products ranging from medical, motor vehicle, fire, industrial and ordinary life.

Claver Gatete, the governor of BNR told The EastAfrican, “When we were drafting the legislation we consulted players in the region and compared internationally and we came up with a price of capital requirement because we have to protect the Rwandan people who are paying money for insurance in case of default or in case of anything.”

Consultations

He added that industry stakeholders were consulted and had accepted the terms of the new legislation with companies asking for a grace period of two years to comply with the law, which expires this June.

“Other insurance companies have complied, they (AAR) asked to close. They opted to pull out because they were not making money and for some other reasons they could not tell us. They have also arranged to hand over to other firms, clients whose files had not expired,” he said.

Currently, Rwanda has nine insurance companies, with four providing life and long term insurance. Analysts however say AAR’s exit reflects growing competition in the country’s insurance sector with most companies diversifying their businesses to cope. In particular, private health insurance also faces stiff competition from heavily subsidised government insurance policy, Rwandaise d’Assurance Maladie (RAMA) which offers relatively affordable package.

Industry experts say the government’s decision to introduce obligatory universal health insurance, and a strong policy support to the development of mutual health organisations throughout the country, leaves limited room for profitability for private health insurers.

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