Ethiopian Business Review

Restructuring Ethiopia’s Insurance Industry

Just like any other aspects of the economy, the insurance industry had been significantly affected by the overall economic and other policies existed in Ethiopia. Though the potential for growth is strong, the insurance industry is not delivering as expected due to structural bottlenecks and challenges at macro as well as micro levels. 


Hence, to develop the industry, and achieve the growth envisioned, deeper understanding of the realities on the ground and enabling legal and regulatory framework is needed. On top of these, broader understanding of the industry perspective through the value chain, establishing industry conduct that will enhance consumer trust, identifying growth avenues and by crafting right strategies is also required. Above all liberalizing the sector in every aspect is needed to emancipate the industry.

Industry Performance 

According to the National Bank of Ethiopia (NBE), written premiums of the 16 insurance companies operating in Ethiopia totaled ETB8.4 billion (about USD300 million), as at 30th June, 2018, up from ETB7.4 billion in June 2017. General insurance accounted for 94.5Pct of the total written premiums, with motor vehicle insurance representing the largest portion of general insurance – constituting 51.8Pct of total insurance premiums and 54.8Pct of the gross written premiums under general insurance class of insurance. 

The loss ratio at industry level also stood at 76Pct while insurance penetration, defined as the ratio of premiums written to gross domestic product (GDP), remains below one percent– the same as in 2017. Insurance density, the amount of premium written compared to total population also remains low. Total capital of the insurance companies reached ETB5.4 billion, of which 74.6Pct was that of private insurance companies. Overall, in light of other insurance industries operating in the continent, the Ethiopia’s insurance industry performance lagged behind. In order to make the insurance industry competitive at continental level, the following issues should be addresses by responsible public and private institutions. 

Overhauling the Regulatory landscape

Proclamations and directives that governs the insurance industry sets minimum capital requirements, registration, assets, liabilities, solvency and investments, inspection, rates, claims, ownership structures, brokers and other auxiliaries, reinsurance and other aspects. However, the industry requires a significant regulatory shake-up. Following the recent decision of government to privatize some of the state owned institutions, the “closed door” policy of the government should also be applied to the insurance industry by liberalizing the sector, which is crawling for over a century.

This would significantly help to minimize gaps in knowledge, experience and capital to improve the growth of the sector. To foster reforms, independent regulatory agency dedicated to insurance is also needed. The change in regulatory independence and regulation by itself would allow professionals with better experience to improve the sector and harmonize industry rules and practices with counterparts in eastern part of Africa to ensure that the local insurance industry is more regionally relevant, at least in the short run.

Getting Closer to the General Population

There is massive growth potential in Ethiopia considering the more than 100 million population size and untapped market. However, apart from offering suitable insurance product and satisfying local need, addressing the large protection gaps revolves around three key consumer factors: awareness, affordability and access. 

In this regard, insurers need to made great strides in extending financial services to the wider population through the innovative use of technology and adaptations of existing products. Since the products of insurers mainly do not translate well to low-cost models specialized institutions are needed to develop successful products suitable for low-income and rural population to enable them deal with the many risks that reinforce poverty.

Filling Capacity Gap

Insurance is actually one of the industries in Ethiopia that has a real shortage of capable work force. To curb such challenges a strong institution is required with the objective to promote professionalism through education, training, research and development. Organizing insurance and risk management courses and seminars for the insurance industry and the public also helps.  

Surprisingly, there is no strong institution in the country to meet such demand and there is no single qualified actuary operating in the market developed by the industry. Currently, the actuarial functions are entirely outsourced entirely to foreign professionals, mainly to companies based in Kenya.  

With education and training, it is believed that professionals will bring the required change and will be committed to maintaining the highest standards of technical competence and ethical conduct. Moreover, this would also help to develop professionals and industry that could understand the concept and real wit of insurance and develop market where the best interests of the consumer are to the fore, ongoing learning and expertise are cherished, and the highest standards of ethical behavior are embraced.

Developing Visionary Leadership 

There will always be risk and there will always be a need to manage that risk. Ethiopia has plenty of opportunities to grow and innovate across the entire spectrum of insurance business. But to realize this, the business requires specialist knowledge and there is an urgent need to develop a strong and diverse talent pipeline and visionary leadership. With this the Ethiopian insurance landscape can have the potential to grow locally and create a solid base for reaching other markets outside Ethiopia. 

6th Year . Sep 16  - Oct 15 2018 . No.66



Fikru Tsegaye

Fikru Tsegaye holds MBA in Marketing and MA in Human Resource and Organizational Dev’t. He is currently working at Ethiopian Insurance Corporation as Marketing and Strategic Management Team Leader. He can be reached at

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