The entry of Barclays Life and Allianz into Kenya is expected to shake up the insurance market with innovative and competitively priced products, putting local and South African firms under new pressure from European underwriters.
“The two have opted for greenfield entry,” said a senior official at Kenya’s Insurance Regulatory Authority. He said Barclays Life had already been given a licence to start operations while Allianz is in advanced stages of securing its permit.
Their entry could further accelerate the pace of mergers and acquisitions in the sector as well as attract investors seeking to capitalise on the gap in the provision of non-statutory covers, especially those targeting non-group schemes and low income earners.
Barclays Life and Allianz see enormous potential for growth in a market where insurance penetration stands at 3.5 per cent, but with an impressive premium growth of 20 per cent year on year.
Prudential Assurance returned to Kenya after nearly two decades with the acquisition of Blue Shield Insurance this year. Although the value of the acquisition was not disclosed, Prudential said it will spend $17 million on its operations in Kenya in the first year.
Swiss Re last year bought a 26.9 per cent stake in Apollo Investments, the holding company of APA Insurance, that was previously held by private equity firm LeapFrog Investments.
LeapFrog Investments has in turn invested $18.6 million to gain control of Resolution Health East Africa Ltd, which owns Resolution Insurance, a specialist health insurer.
Old Mutual announced in January that it had bought a 60.7 per cent stake in UAP, which also has operations in Uganda, for $253 million.
Old Mutual Kenya CEO Peter Mwangi said in an interview that UAP would be integrated into the Old Mutual business in Kenya, indicating possible re-branding.
Other recent consolidations include Britam acquiring Real Insurance in December 2013 in a cash-and-share swap deal valued at $16.4 million; Metropolitan International, a division of the JSE-listed life insurer MMI Holdings, is buying shares in Cannon Assurance for $27.3 million.
Analysts say Africa’s fast growing economies, improving insurance sector regulation and an expanding middle class are attracting new foreign direct investment to the industry.
Jubilee Holdings, Kenya’s largest insurer, announced earlier this year that it plans to buy out smaller insurance companies to expand its business.
“We shall be making some announcements soon,” said Jubilee Group chairman Nizar Juma.
Other drivers of new capital inflow into the industry include disposal of assets by the first generation of entrepreneurs and divestment by venture capitalists once their investments mature.
“The low penetration rates present room for growth in the insurance business” said Standard Investment Bank in a sector overview.