NAIROBI, Kenya, May 7 – Co-operative Insurance Company of Kenya (CIC) has commenced the restructuring process that will see their life and general insurance businesses separated as required by insurance regulations, according to its top management.
CIC Managing Director Nelson Kuria said on Friday that they have moved to split the two classes of insurance business as required by the Insurance Regulatory Authority (IRA) in the exercise that is largely expected to reduce inefficiencies associated with underwriting composite business.
“For purposes of improved risk management, we are splitting our business to separate companies and we indeed want to present separate applications for the renewal of our licenses for 2011,” he said.
When this approval is granted, the firm will operate as a group composed of the CIC Life Assurance Company, CIC General Insurance and CIC Asset Management Company.
The poor performance of certain business lines such as motor business has on several occasions impacted the industry’s overall general insurance negatively causing some firms to divert funds from the life insurance which is a long term investment to address their cash flow problems.
By calling for the de-merger of composite insurance firms therefore, the regulator intends to encourage the 15 firms that offer composite insurance in the country to singularly focus on the different classes and hopefully improve their profitability.
Mr Kuria who spoke after the company’s Annual General Meeting, further added that CIC has already complied with the directive to increase their paid up capital ahead of the June 14th deadline.
Composite insurance companies are required to raise their minimum capitalisation to Sh450 million in a move designed to safeguard the interests of policyholders.
Mr Kuria said as a way of expanding their footprint in the region, they are eyeing the Malawian, Tanzanian and Southern Sudan markets where they hope to set up shop in the next two years.
“We are already in discussion with the Malawian Cooperative Movement that approached us for technical assistance and also some form of participation,” he said adding that the Tanzanian market was still virgin and presented an opportunity for them to exploit.
In reaffirming the position of the Kenyan cooperative movement as the continent’s best and the seventh globally, CIC is also looking at setting up operations in Southern Sudan where they hope to ride on the back of the Cooperative Bank which is ready to enter the market in the next few months.
During the AGM, shareholders approved a dividend payout of Sh1.60 per share, which was an eight percent increase from that paid in 2008, enabled by the firm’s 26 percent growth in profit before tax for the year ended 2009.
The meeting was also attended by government officials such as the Cooperatives Permanent Secretary Seno Nyakenyanya who reiterated the government’s support to the firm as it seek to improve access to insurance in the country.
The PS challenged cooperatives to diversify their avenues of mobilising savings through the development of innovative micro-finance products which would encourage more people to join the movement.
“CIC has played a strategic role of insuring members’ deposits and loans thus creating confidence and stability in the cooperative movement with special reference to the Sacco sub-sector,” the PS said.
The Sacco sub-sector has mobilised savings of Sh180billion which represent 32 percent of the natiioal savings and also has an asset base of Sh200billion and has been touted as the best vehicle of fighting poverty and inequality in the society.