French development institution Proparco has acquired a stake worth Sh1.2 billion ($10 million) in Mauritian insurance company MUA Ltd, which has a presence in Kenya.
The deal makes Proparco the largest international institutional investor at MUA, which entered the Kenya market in 2014 through the acquisition of Phoenix Transafrica Holdings, which traded in Kenya, Tanzania, Uganda and Rwanda under the brand Phoenix East Africa Limited.
MUA deepened its local presence in 2020 by buying out Nairobi-based Saham Assurance company in a deal worth Sh1.23 billion.
The firm merged the two businesses last year into MUA Kenya, after previously coming under pressure from the sector regulator to merge the licences.
The Proparco investment will see the French fund get 4.1 million ordinary shares in MUA, but the firms did not disclose the size of stake this represents in the insurer. They however said the deal received the required shareholder and regulatory approvals in July and August respectively.
“With the completion of the final regulatory steps, MUA’s partnership with Proparco truly begins. By strengthening the group’s financial capacity, we aim to grow insurance coverage in the East African region and to reach our sustainability objectives,” said MUA group outgoing chief executive Bertrand Casteres.
Proparco will now appoint one board member to the board of directors of the Mauritian insurer, allowing it a say in the strategic direction of the firm.
The firm is now hoping to leverage on the new investment to deepen its reach in Eastern African markets, which also include Seychelles.
Locally, MUA first expressed interest in expanding its presence during former President Uhuru Kenyatta’s visit to Mauritius in 2019, when the firm announced plans to acquire a local insurer in what turned out to be the Saham deal.
The Kenyan insurance market remains attractive to potential investors due to headroom to grow— because of low insurance penetration.
Data from IRA shows insurance penetration in the country dropped to 2.34 percent in 2019 –the lowest in 15 years— on the back of price undercutting in an industry where players are facing increasingly tough competition.
Penetration hit its peak in 2013 when it stood at 3.44 percent, but the rate has been declining in the last five years with a vast population of low-income as well as micro and small businesses generally not covered.
Majority of Kenyans without an insurance policy decry high premiums, keeping penetration low despite efforts by the sector regulator to educate the public on the need for cover.
The 2021 Financial Access Household survey shows the proportion of the population that says it cannot afford insurance almost doubled over the last five years, to 65.4 percent from 35.2 percent in 2016.
The survey was carried out by the Central Bank of Kenya, FSD Kenya and the Kenya National Bureau of Statistics between 2019 and 2021.
At the same time, the proportion saying they do not have insurance cover because they do not know about insurance has dropped to 14.3 percent, from 40.9 percent in 2016.