Equity Group gets nod to set up independent insurance company


Equity chief executive James Mwangi. FILE PHOTO | NMG

Equity Bank #ticker:EQTY has decided to venture into the insurance business after a decade of learning the ropes as a bancassurance agent.

The lender’s board, which met on Thursday, endorsed a plan to set up a conglomerate that will oversee all insurance business for Equity Group Holdings.

“The board of directors has approved the setting up of a non-operating holding company to hold EGH’s insurance business subsidiaries and a subsidiary in Kenya to conduct and undertake long-term insurance business in Kenya,” Equity Group Managing Director James Mwangi said in a cautionary statement.

Equity Insurance Agency Ltd, the group’s fully fledged subsidiary, was licensed in May 2007 by the Insurance Regulatory Authority to offer life and non-life insurance.

Equity now wants to put in place a fully fledged business with separate structures and commercial arrangements that will manage insurance-related products for the group.

The move comes after the IRA issued regulations for setting up insurance conglomerates to ensure that each entity in the group has a distinct operational framework, including premises.

IRA wants to police interparty transactions, capital adequacy and interparty transactions done by regulated and unregulated businesses operating under one group banner.

Equity Group turned regional for growth, going after an ambitious multi-market entry by acquiring four banks from Atlas Mara in Rwanda, Zambia, Tanzania and Mozambique.

While the deal was struck, Equity opted for a 66.5 per cent stake in Banque Commerciale du Congo (BCDC) for Sh10.7 billion.

Maturing market

On the local scene, expansion of banks has been constrained by a maturing market, with over 83 per cent financially included with either an account or mobile wallet.

Banks have also turned to mergers and acquisitions, with Commercial Bank of Africa marrying National Industrial Credit to form NCBA, KCB taking over National Bank and purchasing Imperial Bank assets, and Co-operative Bank seeking to buy Jamii Bora Bank.

Equity Group’s venture into insurance is in line with its bet on setting up a financial service firm with digital subsidiary Finserve that hosts Equitel, investments and consulting.

Insurance offers a great opportunity for growth given that Kenya’s cover industry has had low penetration and now stands at 2.43 per cent of the country’s gross domestic product, a 15-year low.

The industry is skewed towards general insurance business underwriting, which contributes 57.3 per cent of the industry, of which most is motor insurance, with huge claims settlements that may have informed Equity’s strategy to target long-term products.