Companies

Equity Group invests Sh400m in insurance division

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Equity Bank branch on Muindi Mbingu Street in Nairobi on Thursday, April 1, 2021. PHOTO | DENNIS ONSONGO | NMG

Summary

  • Equity Group has invested Sh400 million in establishing a subsidiary that will run its insurance business as the firm seeks to diversify from the mainstay banking operation.
  • Equity earlier this year received a licence to operate a life insurance business through Equity Life Assurance (Kenya) Limited (ELAK).
  • This marked the Kenyan multinational’s first direct venture into the insurance sector after more than a decade as an agent of established underwriter Britam Holdings through a bancassurance agreement.

Equity Group has invested Sh400 million in establishing a subsidiary that will run its insurance business as the Nairobi Securities Exchange-listed firm seeks to diversify from the mainstay banking operation.

The company has committed the amount to Equity Group Insurance Holdings Limited, according to disclosures in its latest annual report.

Equity earlier this year received a licence to operate a life insurance business through Equity Life Assurance (Kenya) Limited (ELAK).

This marked the Kenyan multinational’s first direct venture into the insurance sector after more than a decade as an agent of established underwriter Britam Holdings through a bancassurance agreement.

Insurance offers a significant opportunity for growth given that the uptake of covers in Kenya is less than three percent. Across the region, the pattern of greater uptake of banking services compared to insurance products is replayed.

Kenya’s Sh276 billion annual insurance market is dominated by general insurance with mandatory motor and medical policies.

Motor and medical insurance, however, have huge claims and high loss ratios which may have informed Equity’s strategy to target long-term products.

Equity has chosen life insurance which comprises Sh123 billion in annual premiums or 44.5 percent of the overall insurance business.

Equity’s entry into insurance has been enabled by legal and regulatory changes that allowed lenders to go into non-banking businesses after undergoing the necessary corporate restructuring.

Most of the big banks have transformed into non-operating holding companies which are free to own banking and non-banking subsidiaries.

The holding companies are, however, still regulated by the Central Bank of Kenya.

The parent companies can use the capital they have built up over the years to continue their expansion in banking or launch new ventures.

The NSE-traded firm formed Equity Group Insurance Holdings Limited to house its underwriting business, the first of which is ELAK.

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