Why consolidation is slow in Kenyan insurance
Delays by the insurance regulator to impose capital adequacy ratios rules has given struggling firms more time and forestalled the much anticipated mergers and acquisitions.
Insurance companies were required to increase their capital in line with a new law introducing a new risk-based regime which would have required firms to preserve cash.
The new law is expected to increase current standard capital of Kes 300 million for general business to Kes 600 million or 20 per cent of the net-earned premiums of the preceding financial year, whichever is higher.
Long-term business (life) insurers currently setting aside Kes 150 million will raise their capital to Kes 400 million, or five per cent of the liabilities of the business for the financial year, whichever is higher, while a composite underwater will have to shore up capital to Sh1 billion.
Sources at the Insurance Regulatory Authority intimate that some of the struggling insurance companies asked for more time citing Covid-19 woes.
The sources said some of the big firms were waiting for the new law to come into force and absorb clients from competitors without paying a cent.
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Insurance is an annual business with very flexible clientele who can switch providers at a whim especially for the general business.
Stable players were waiting for struggling insurers to die a natural death and take up their customers instead of instituting mergers and acquisitions.
The only consolidation that has been seen in the market is mostly from foreign-based firms seeking to make entry into Kenya and East Africa.
Moroccan conglomerate Holmarcom Group, through its holding company, Holmarcom Insurance Activities, has acquired a majority stake in Kenya’s Monarch Insurance Company—a firm associated with a Kanu-era business tycoon, Jared Kangwana for an undisclosed sum.
Mauritus Union Assurance Company (MUA) acquired 100 per cent of Saham Assurance Kenya for Sh1.2 billion through its subsidiary MUA Insurance Kenya, formerly known as Phoenix of East Africa Assurance Company.
The move is second such acquisition by the Mauritian biggest underwriter by market share, marking its expansion into the East African market where it had acquired of Phoenix Transafrica Holdings (with a presence in Kenya, Tanzania, Uganda and Rwanda) in 2014.
With the acquisition the firms are targeting and long-term strategy in Kenya dubbed “Ambition 2020” which plans substantial investments to finance our growth in Kenya and more broadly in East Africa.
Allianz completed the purchase of a 66 per cent stake in Jubilee General Insurance Limited in Kenya from the parent company Jubilee Holdings, which will retain a 34 per cent stake in the business.
The deal is Allianz’s second direct investment in the country, after establishing Allianz Insurance Company of Kenya Limited as a greenfield operation in 2014.
