NAIROBI, Kenya, Mar 2 – Kenya’s insurance industry is expected to see increased consolidation this year as the sector gears up to the growing middle class and high foreign investor appetite.
The country has about 47 companies offering insurance services with a total of Sh130 billion in written premiums in 2013 and a total net profit of Sh14.5 billion in an industry where penetration is at 3.5 percent.
Several international insurance companies have expressed interest in either buying stakes in existing Kenyan enterprises or setting up new subsidiaries owing to a steady economic growth and expanding middle class with higher disposable income who are increasingly taking up life insurance policy.
“In 2015 we are anticipating to see more acquisitions and investments in the insurance industry as there is potential for the market to grow. It’s profitability has created a high level interest, the sector grows hand in hand with the economy,” said Association of Kenya Insurers (AKI) Chief Executive Tom Gichuhi in an interview with Capital FM Business.
He said with the growing Kenya economy in various sectors, foreign investors can foresee a potential growth in the sector.
“Kenya’s growth of the oil and gas sector, the building of the railway, roads, the LAPPSET project, the real estate sector, the growing of the middle class; all these sectors will need insurance… insurance companies are also gearing up for that,” he added.
Gichuhi also pointed out that expected in the new guidelines that will come into force after being approved by Parliament later this year, insurers will now be forced to have one arm of business either life insurance or general insurance, not both.
“Companies will be forced to split the two arms of life insurance and general insurance in two different companies. Some companies are preparing in readiness for this, all these consolidation will create much stronger and more financially viable units that can take up huge insurance risks that are needed in the industry, “he added.
Among the latest entries in the Kenyan market include South African-based Metropolitan and Momentum International (MMI Holdings) that acquired a majority stake at Cannon Assurance Limited in a deal worth Sh2.4 billion.
The deal has seen Cannon Assurance and Metropolitan Life Kenya consolidate their life insurance licenses into one while retaining a stand-alone short-term insurance license and business.
Last year, United Kingdom company Prudential Assurance invested Sh1.5 billion in the Kenyan market with the takeover of Shield Assurance the life assurance arm of Blue shield Insurance.
British American Investment Company (Britam) also bought out a 99 percent stake in Real Insurance Company Limited a deal worth Sh1.4 billion.
In November, Kenya’s Pan-Africa Insurance Holdings said it had entered an agreement that may lead to the purchase of a controlling stake in Gateway Insurance.
UK financial services group Old Mutual plc through its subsidiary Old Mutual Holdings Limited is also purchasing 60.7 percent stake in UAP Holdings Limited.
Gichuhi projects the Industry to grow to Sh200 billion in written premiums by the end of 2015 and a market penetration of 6.5 percent in the next five years.