•Takes the total number of licensed insurance companies to 57, with five re-insurance firms operating in the country.
•Six of the initial 56 underwriters controlled up to 70 per cent of the long-term Gross Premium Income, IRA data for the second quarter of 2021 shows.
Equity has ventured into the insurance business in what could shake up the market and help grow penetration to above the current 2.2 per cent.
The Insurance Regulatory Authority (IRA) yesterday issued a license to Equity Group, which comes into the industry as Equity Life Assurance (Kenya ) Limited, a fully fledged business with separate structures and commercial arrangements.
It becomes the newest entrant into the insurance market, taking the total number of licensed insurance companies to 57, with five re-insurance firms operating in the country.
Equity which grew by targeting low, middle-income earners and SMEs is expected to impact the long-term business in the insurance sector currently with a gross direct premiums value of above Sh233.1 billion.
Six of the initial 56 underwriters controlled up to 70 per cent of the long-term Gross Premium Income, IRA data for the second quarter of 2021 indicates.
They are Britam with a 21.3 per cent market share, ICEA Lion Life Assurance (16.2%), Jubilee (11.5%), Kenindia Assurance Company(8.1%), Sanlam Life(6.9%) and CIC Life (5.6%). The rest of the companies accounted for the remaining 30 per cent.
Insurance group Britam has been offloading its shares in Equity, an indicator it was preparing for the incoming competition.
Last month, Britam sold 253.1 million shares of Equity Group Holdings to the International Finance Corporation (IFC).
This came after it offloaded 20.1 million shares with a market value of Sh852 million in June.
The move by Equity comes about two years after the lender’s board endorsed the plan to set up a conglomerate that will oversee all insurance business for Equity Group Holdings, in March 2020.
The lender for the past 14 years acted as a bancassurance intermediary, having been incorporated (Equity Bancassurance Intermediary Limited) in December 2006, and later licensed in May 2007.
Most banks operate bancassurance intermediaries but do not have fully-fledged standalone insurance businesses.
"We felt the need to make our contribution to the insurance industry and we believe we can make insurance to be understood better by the ordinary person", Group MD and CEO James Mwangi said yesterday.
Speaking during the issuance of the license, IRA chief executive Godfrey Kiptum termed the diversification strategy and entry of Equity Group into the insurance market “proof that the industry in Kenya continues to be attractive to investors.”
“We continue to receive interests from foreign-based financial institutions ranging from brokers, insurers, re-insurance brokers, and re-insurance companies looking for investments in the Kenyan Assurance market. This underscores the position of Kenya as a viable investment destination,” Kiptum said.
Kenya’s insurance industry has continued to enjoy steady growth over the years with the insurance market premiums currently being valued at approximately Sh235 billion.
The market, however, remains driven by the general business category with long-term insurance premiums standing at Sh102 billion.
This accounts for 43.4 per cent of the total premiums underwritten.
“We are witnessing a growth compared to last year and this is attributed to the Covid-19 recovery measures. Our market, however, is still general business-driven and I call upon Equity Life Assurance to identify strategies of increasing insurance growth in the long-term business,” Kiptum said.
Insurance penetration dropped slightly to 2.17 per cent in 2020 from 2.34 per cent in 2019, with general insurance accounting for 57.3 per cent of business.
This is mainly motor insurance which is faced with huge claims settlements, a segment Equity seems to avoid hence the focus on long-term products.
Kenya ranks fourth in Africa in terms of gross premium income after South Africa, Morocco and Egypt.
Pensions account for the highest percentage of gross premium income (39.9%) followed by life assurance (28.9%).
Kiptum emphasised the need to develop ways of enhancing value and trust in life insurance and its distribution if there is to be growth in this class while explaining the important role played by insurance.
He added that globally, insurance business is at a critical stage as the sector responds to social, economic and technological challenges.
He said the industry continues to benefit from a growing educated population, change in cultural norms, increased urbanisation, investment in infrastructure, improved technology and distribution channels.
Kiptum said the government through the IRA is committed to providing an enabling environment to ensure that the insurance sector remains competitive.
“Kenya is among the best-performing countries in Africa in insurance business largely due to innovative distribution channels, a liberalised market and strong regulation,” he said.
The move by Equity comes as Nairobi shapes up to become a financial hub, with the setting up for the Nairobi International Financial Centre, expected to attract more investments into the country and the region.
The Group’s venture into insurance gels with its initiative of setting up a financial service firm with digital subsidiary Finserve that hosts Equitel, investments and consulting.
The announcement on the business diversification however did not have much impact on its shares at the Nairobi Securities Exchange, with the stock quoted at Sh52 yesterday afternoon, having shed some 1.89 per cent from Friday's trading at Sh53.