Politics and policy
Kenya Re gears up for southern Africa expansion
Posted Sunday, August 12 2012 at 16:33
Kenya Re plans to open a branch in southern Africa by early next year as it seeks geographical and sectoral diversification with its special local concessions set to expire in three years.
The company draws more than half of its earnings from Kenya and plans to grow its continental business by setting up more branches in key regions.
It gets a mandatory 18 per cent of the local reinsurance premiums but this guarantee is set to end in 2015, exposing it to international competition.
“We are already underwriting risks in southern Africa markets, but the physical branch will help us offer better services and grow our business,” said Kenya Re Managing Director Jadiah Mwarania.
The listed company is mulling over setting up the branch in Botswana, Mozambique, Zambia, or Zimbabwe once it completes research on the capital and regulatory requirements in each of the countries.
Mr Mwarania added that in the medium term, the company would open another branch in northern Africa where it will target ordinary reinsurance and retakaful, a cover for Islamic insurance firms.
Kenya Re has established a Sharia advisory board that will help it tap into the nascent retakaful business in Kenya and Islamic states in northern Africa.
Besides Kenya, the company has an office in Ivory Coast from where it serves the French speaking insurance market of West Africa. Kenya Re is one of four players in that market and has a 16 per cent share of the Sh39 billion worth of premiums.
The expansion plan comes after the company announced a 36.5 per cent growth in net profit in the first half, helped by increased premiums and investment income.
Its net profit stood at Sh1.1 billion in six months to June compared to Sh845.7 million the year before as net premiums rose to Sh2.8 billion from Sh2.3 billion. Investment income rose 40 per cent to Sh979.4 million helped by the firm’s disposal of a sports complex in Nairobi’s South C area for Sh310 million.
Investment income was bolstered by the company’s bank deposits that earned higher interest as lenders sought to retain large depositors amid tight liquidity. Claims rose faster than premiums at 38.9 per cent to Sh1.5 billion from Sh1.1 billion.
The company’s share price stood at Sh10.6 on Friday on gaining 39.4 per cent in the past six months. It also plans to start underwriting risks in Kenya’s oil and gas industry that has recorded increased activities in the past two years.
It has engaged Total Risk Solutions, an Australian risk management consulting firm, to train its staff on the necessary skills and expertise to underwrite the highly lucrative but risky oil and gas industry.
Mr Mwarania said the company will absorb up to five per cent of the big-ticket risks and will cede the rest to large international re-insurers like Lloyds of London.
The covers include compensation for damages suffered by employees, oil rigs and pipeline infrastructure and could extend to loss of gas and oil stocks if the country finds commercial quantities of the commodities.