KAMPALA, Uganda — Uganda’s insurance sector is seeing a surge in claims due to widespread job losses resulting from government and USAID cuts.
The USAID aid freeze has impacted several policies, particularly workman’s compensation, group personal accident and medical insurance, said Peter Makhanu, managing director of Liberty General Insurance.
“Many entities in the non-governmental organization space have not renewed their policies due to the freeze on USAID activities,” Makhanu said.
About 12,240 jobs under USAID-run projects have been cut or are lined up for cutting as President Trump realigns his administration to drive the America First agenda.
The aid freeze also has led to an increase in claim notifications from banks and Saccos whose clients had insured their loans, according to UAP Old Mutual.
Uganda’s government decision to rationalize departments and agencies through mergers has further exacerbated the issue, resulting in compensation claims.
In December, President Museveni assented to nine bills that rationalized government functions and scrapped key agencies, including Uganda National Roads Authority and Uganda Coffee Development Authority.
This has resulted in job losses, with some employees being returned to parent ministries, while others were laid off.
Insurance companies are required to hold a minimal capital requirement of 6 billion shillings (non-life), 4.5 billion shillings (life) and 1 billion shillings for HMO insurance business.
Despite the challenges, Jonan Kisakye, CEO of the Uganda Insurers Association, expressed confidence that the sector will weather the storm.
“If we were able to handle COVID-19 claims, then we can handle this eventuality,” Kisakye said.
In the last half of 2024, insurance companies paid out a total of 820 billion shillings, an increase of more than 199.4 billion shillings from the previous period.
Smaller insurance companies may face liquidity issues, particularly as banks try to avoid losses if a borrower loses their job, said Fred Muhumuza, a senior economist.
The insurance sector is currently assessing the extent of the impact of job losses, with signs of stress starting to manifest among some companies.
“Some companies that were previously insured are now saying they cannot renew their policies due to the loss of funding,” Makhanu said.
The industry also is expecting an increase in health care claims, given that many of the companies and NGOs that have been impacted are in the health sector.
