New Regulations Allow For Bancassurance In Uganda

The Insurance (Bancassurance) Regulations, 2017 were recently gazetted, giving effect to bancassurance under the Insurance Act, 2017 (which is yet to commence) and the Financial Institutions Act, 2004.

The introduction of Bancassurance in Uganda

Bancassurance refers to an arrangement where an insurance company uses a bank's sales channels to sell insurance products.

The Insurance Act expanded the definition of bancassurance beyond just the arrangement between the financial institution and the insurer or health membership organisation to use the financial institution's channels to sell its insurance products. The definition now includes the financial institution acting as an agent for the insurer or health membership organisation and entering into a group or master insurance contract as a policy holder, with the intention that the customers (or a class of customers) of the financial institution obtain insurance covered under that contract.

Under the Insurance Act, a financial institution or a micro finance deposit-taking institution may apply to be a bancassurance agent with the approval of the Insurance Regulatory Authority (the "Authority").

In 2016, the Financial Institutions Act was amended to provide for bancassurance business. It specified that the Authority would be responsible for receiving applications from financial institutions for licensing to conduct bancassurance business, subject to prior written authorisation from the Central Bank.

Key points under the Insurance (Bancassurance) Regulations, 2017

application for a licence by a prospective agent is to be made to the Authority with a non-refundable application fee of UGX500 000. unless otherwise approved by the Authority, the bancassurance agent and insurer are required to have an exclusive relationship. The relationship is to be governed by a service agreement between the insurer and the bancassurance agent in which the duties and responsibilities of both parties must be defined. The agreement should provide for the collection, remittance and reconciliation of premiums and other funds that may be received by the bancassurance agent. The agreement must be approved by the Authority. bancassurance agents are required to pay an annual compliance fee of UGX1-million. The annual compliance fee is for the calendar year in which it is paid. the Regulations require the bancassurance agent, at the time of making its application, to appoint a suitably qualified Principal Officer who will...