Kenya Re eyes new deals with Sharia-compliant unit

Kenya Re is responding to regional insurance market dynamics following this year’s launch of Takaful Insurance of Africa .File
Kenya Re is responding to regional insurance market dynamics following this year’s launch of Takaful Insurance of Africa. File 

Kenya Reinsurance Corporation plans to venture into Sharia-compliant business to grow its income and tap into the expanding Islamic finance in Africa and the Middle East where it already has a presence.

The venture into what is known as Retakaful is part of the company’s five year plan of product diversification to meet the reinsurance demands of new businesses.

“The intention is to have a department that fully complies with all the Retakaful requirements so that Takaful firms are not shy to give us business,” said Kenya Re chief executive officer, Jadiah Mwarania.

During the company’s annual general meeting last week at the Bomas of Kenya, Mr Mwarania said the company will additionally venture into microinsurance and political risk insurance.

“We will apply strategies to overcome market and environmental challenges as we compete for business in Africa, Middle East and Asia,” he said. “Our plan is to continue growing premiums by focusing on new markets and deepening our penetration in markets that we already operate in.”

By going into Retakaful, Kenya Re is responding to regional insurance market dynamics following this year’s launch of Takaful Insurance of Africa, a fully-fledged Sharia-compliant insurance company that plans to expand its operations into Tanzania and Uganda.

First Community Bank, an Islamic Bank also partnered with Cannon Assurance to develop and sell Takaful products in general insurance.

Africa Trade Insurance Agency (ATI) also partnered with the Islamic Cooperation for the Insurance of Investment and Export Credit in March effectively enabling ATI to offer Retakaful services for imports and exports between the two Africa and the Middle East.

Kenya Re’s competitors have also entered the Retakaful market. In September 2010, Africa Re launched a subsidiary company based in Egypt to offer exclusive Retakaful services while Comesa-owned reinsurer ZEP-RE— where Kenya Re is a shareholder—set up its Retakaful subsidiary based in Sudan in September 2009.

The change to Retakaful will mean more business flows into the company from predominant Muslim countries like Sudan and the North Africa, where Kenya Re is deepening its presence.

Its Retakaful focus will enable it to widen its business partnerships in the West African market where it has reopened its offices after the end of the civil war in Ivory Coast. West Africa has a substantial Muslim population.

Delay in having dedicated Retakaful department has denied the company substantial revenues especially because in addition to operations in 23 African countries, it also has a presence in 11 countries in the Middle East and Asia.

According to latest Ernst & Young World Takaful Report, global Takaful contributions reached Sh595 billion in 2009 and are expected hit Sh1 trillion this year. The report said Sudan is the fastest growing Takaful market outside the Gulf countries. But Kenya Re will have to reinvest income from Retakaful department outside the country because Kenya does not have Sharia-compliant capital market products like the bonds that are known as Sukuks.The same challenge has been facing local Islamic banks and insurers.

New revenue from Retakaful will help the company increase its gross premiums that grew by almost Sh1 billion from Sh3.8 billion in 2009 to Sh4.9 billion in 2010 while the investment income grew from Sh1.1 billion in 2009 to Sh1.7 billion in 2010.

Profit after tax grew to Sh1.5 billion in the year ending December 2010 compared to Sh1.3 billion in the previous year. Gross claims were up 12.2 percent at Sh2.19 billion.

Kenya-Re currently underwrites business for all the 47 insurance companies in Kenya, which are by law required to cede 18 per cent of their reinsurance to the company up to 2015, accounting for 40 per cent of Kenya-Re’s gross premium income.

Growth will also be driven by tripling of the mortgage lending, which shot from an annual Sh100 million to Sh300 million starting January 2011.