Markets

Kenya ranked high in insurance uptake

cic MAL

Malawi sacco CEO Sylvester Kadzola (left) and CIC Insurance chief executive Nelson Kuria sign a joint venture deal. Photo/Salaton Njau

Summary

  • A. M. Best, a global rating firm specialising in insurance, says in a report dated March 2014 that Kenya, Ghana and Nigeria have witnessed rising take-up of insurance services in the face of rampant poverty.
  • A.M. Best report notes that in terms of insurance penetration, Kenya and Morocco with 3.2 and 2.9 per cent levels of the gross domestic product, respectively, are comparable to some developed markets in Europe as well as Brazil and China.

Kenya has been ranked among the top three African markets in terms of profitability for insurance companies seeking expansion opportunities.

A. M. Best, a global rating firm specialising in insurance, says in a report dated March 2014 that Kenya, Ghana and Nigeria have witnessed rising take-up of insurance services in the face of rampant poverty.

“There are a number of attractive markets for insurers in Africa to consider, including Kenya, Nigeria and Ghana. Kenya’s insurance sector has proved robust and resilient, despite there being many poor households,” says the report titled Africa Market Review: Gearing up for Sustained Growth.

It notes that premiums in Kenya have been growing by double digits, rising by 24.5 per cent in 2012. “Premiums have been growing by double digits, fuelled mainly by the non-life sector,” says the report.

Kenyan insurance companies expanding into East Africa and diversifying into other areas has been taken by analysts as an indicator of a thriving sector.

The most recent to expand its footprint is CIC Insurance which ventured into Malawi with Sh300 million investment in a joint venture with Malawi Union of Savings and Credit Co-operatives Limited.

The amount represents a 49 per cent stake in the joint venture, with operations expected to start in July.

“By venturing into Malawi, CIC will be in competition with Britam which is also on course to gain a foothold in Malawi following the acquisition of Real Insurance,” said Standard Investment Bank in an update for investors released Wednesday.

READ: Real Insurance buyout aids Britam to close gap with Jubilee

CIC, Britam and Pan Africa are in the course of investing in the property market through retained earnings or injection of expansion capital.

The A.M. Best report notes that in terms of insurance penetration, Kenya and Morocco with 3.2 and 2.9 per cent levels of the gross domestic product, respectively, are comparable to some developed markets in Europe as well as Brazil and China.

The report says that insurance premiums in Kenya stood at Sh112 billion in 2012 which amounted to a growth of 24.5 per cent. Of the total, non-life insurance stood at 65.8 per cent.

Kenya’s growth in premiums is contrasted with the Africa-wide growth of only 4.2 per cent. Premiums in Nigeria, which has 174 million people, are expected to quadruple in the next five years. In Ghana, which began extracting oil two years ago, the life insurance market is estimated to be growing at 40 per cent annually.

Financial strength

Despite South Africa having the largest underwriting market amounting to $54.4 billion in 2012, its growth has been sluggish at only 3.8 per cent in the same year.
In Angola, despite being powered by oil extraction, insurance contributes to the economy less than one per cent.

Last year, A.M. Best rated the financial strength of three Kenyan-based re-insurers ‘‘Fair’’ and ‘‘Good’’.

Kenya Reinsurance are the highest rated with a B+, which means that it is in the ‘‘Secure’ or ‘‘Good’ category.

East African Re was rated ‘‘Fair’’ with a ‘B’, considered ‘‘Vulnerable’’ position.

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