By Peter Nyanje
While reinsurance services are critical for cushioning insurance companies against catastrophic losses, Tanzania’s growing reliance on foreign reinsurers is emerging as a major obstacle to the sector’s sustainable growth.
Industry experts note that although the market has expanded steadily in recent years, the challenges associated with reinsurance – ranging from foreign currency pressures to high costs – are threatening affordability and limiting innovation.
Tanzania’s insurance penetration currently stands at just over 2 percent of GDP, meaning the local market lacks sufficient financial muscle to absorb large risks.
Insurers are compelled to cede a substantial share of their premiums abroad, especially for high-value sectors such as oil and gas, aviation, and infrastructure projects.
This dependence results in significant foreign exchange outflows, a pressing concern at a time when the shilling faces depreciation pressures.
Rising costs and weak bargaining power
Foreign reinsurers often perceive Tanzania as a high-risk market, leading them to impose higher premiums.
The knock-on effect is that local insurers pass on these costs to consumers, limiting the affordability of insurance products in an already low-penetration market.
With penetration still very low, passing extra costs to policyholders only widens the protection gap.
Due to the small size of Tanzania’s insurance industry, local players also have limited bargaining power, meaning reinsurance terms are usually tilted in favour of global players.
Regulatory and capacity gaps
The Tanzania Insurance Regulatory Authority (TIRA) requires all insurers to cede part of their risks to Tanzania Reinsurance Company (Tan Re) before turning to international markets.
While the move aims to build local capacity, insurers argue that mandatory cessions sometimes reduce their flexibility and limit access to more competitive foreign reinsurance arrangements.
Another concern is the skills gap in structuring complex reinsurance contracts.
Many underwriters and brokers lack expertise in designing optimal reinsurance programmes, leading to poor risk pricing and disputes during claims.
Delayed claims and global shocks
Claims settlement delays are another recurring challenge. When large claims occur, foreign reinsurers often take longer to investigate before releasing payments, eroding public trust in the sector.
Moreover, Tanzania remains vulnerable to global shocks. Natural disasters, pandemics, or financial crises that drive up global reinsurance rates directly affect the cost of doing business locally.
Looking ahead
Despite these challenges, stakeholders should remain optimistic, especially from steps taken by the government through TIRA to address this shortcoming.
According to TIRA, digital innovation, rising demand for specialised insurance products, and regulatory reforms are expected to reshape the sector.
However, industry leaders stress that strengthening local reinsurance capacity, enhancing skills development, and improving regulatory flexibility will be vital if Tanzania is to reduce dependency on foreign markets and unlock greater insurance penetration. Without addressing reinsurance challenges, Tanzania’s insurance sector risks growing in numbers but not in depth.
