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More acquisitions and new insurers expected this year

Insurance Companies in Kenya

Kenya’s insurance industry is expected to see a round of consolidation this year as insurers and underwriters look not only to increase market share but also meet higher capital requirements the sector has at the moment.

The sector has witnessed a rapid growth over the last few years despite the sluggish insurance penetration at just 3.4 percent of GDP in 2013, according to Insurance Regulatory Authority (IRA), the market’s governing agency, a small increase from 3.02 percent in 2012, but still far below Mauritius’ 7 percent and South Africa’s 14.16 percent.

Available data from IRA shows that written premiums reached a compound annual growth rate (CAGR) of 15.1 percent from 2004 and 2014 with some in-house estimates showing the non-life segment has grown at 20 percent annually during the period while health insurance component is fast leading the expansion with a 38 percent growth yearly.

Currently there are at least 44 registered insurance firms offering insurance services in Kenya but the market space continue to attract more players, resulting in significant competition in what remains a relatively small playing field but with massive growth potential.
Last year for instance Prudential plc, a UK-based insurance conglomerate entered Kenyan market after buying out Shield Assurance Company Limited, a firm licensed in 2009 after a demerger from insurance company, BlueShield and subsequently set up an office in Kenya to act as contact office for the EAC market.

In November last year private equity firm LeapFrog Investments announced it was planning to buy a majority stake of the Kenya’s fourth largest health insurer, Resolution Insurance, with a bid valued at around sh1.6bn ($18.7m) with the trend likely to continue this year, according to players in the industry.

So far one major deal has been announced this year and more are expected to come. Old Mutual acquired a 37.3percent stake in local insurer UAP Holdings for $155.5m in investing a total of $253m during the month of January and took its holding up to 60.7 percent.

Players in the industry now say the tendency is likely to continue this year judging by the number of past mergers and new entries which were largely driven by higher capital requirements as well as an IRA-imposed cap on individual stakes in insurance firms at a maximum percentage of 25 after the rule was revised in and announced in 2012.

“Insurance penetration is still low in Kenya compared to other African countries and space for expansion is still, I will therefore not be surprised to see more companies raiding the local market,” commented Reinsurance Solutions Kenya ltd Regional Director Harold Mbati, during the official launch of Reinsurance Solutions on Friday, who revealed that the firm has been doing underwriting and brokerage services in Kenya prior to the set up of a physical office two months ago.

The company is owned by the holding company in Mauritius, which is a joint venture between an African investor consortium which has 65 percent while the 35 percent belongs to a Management consortium.

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