Foreign buyers eye local insurers

Foreign investors are eyeing a stake in some local insurers that have been unable to reduce individual ownership to less than 25 per cent as required by the law.

Reports indicate that a company is on the verge of being bought out 100 per cent by a group of local investors as pressure for the firms to cut individual ownership and comply with the rules mounts.

So far, five companies have yet to reduce the threshold of individual ownership.

According to the Insurance Regulatory Authority, many of the foreign firms are from Nigeria, Morocco, Mauritius, South Africa, and Canada.

“We are increasingly getting foreign firms enquiring about possible investment in the insurance companies in the country. Some of these are at advanced stages in their negotiations with some local insurance companies,” said the authority’s chief executive, Mr Sammy Makove, last week.

He, however, said he was bound by the clause of non-disclosure before the deals are sealed and hence could not provide the names of the firms that are the target of foreign investors.

Last month, the regulator said 15 of the country’s 47 insurance companies had not complied with the law and, as a result, their licences for this year had not been renewed.

The new requirement states that individual stake in an insurance company be not more than 25 per cent in order to enhance governance and prevent possible collapse, as has happened in the past. The new law was introduced in 2009, with a three-year transition period to 2011.

It demanded that companies with a higher threshold either sell some of the stake or merge with others to dilute their shares.

Experts, however, said some of the companies had failed to attract suitors, hence the delay in meeting this requirement.

“We are in the global market and as much as we might want to shield our companies from foreign investors, it can only happen in the short-run. If local insurance companies lack local investors willing and able to invest, then there is no alternative but invite those with the requisite capital and expertise,” said Mr Tom Gichuhi, the managing director of the Association of Kenya Insurers, a lobby for the industry.

Only 10 of the 47 insurers control over 70 per cent of the total premiums, leaving others struggling to survive.

The latest to attract foreign investors is Mercantile Insurance Company, which has sold a controlling majority of 60 per cent to a Moroccan-based insurance group, Saham Finances, through its subsidiary Colina Holdings.

Colina operates 15 companies in 13 African countries and is wholly owned by Saham Finances, that bought the Mercantile insurance firm shares from the Pandit family, were the majority owners.

Group managing director Raymond Farhat said Mercantile would retain its current structure and seek to benefit from the expertise provided by its new partners. Mercantile was started in 1993 by Mr Lalit Pandit, now deceased, and was at one time part of the East African Building Society group of companies.