Equity Group ventures into insurance business
By Steve Umidha, January 10, 2022Equity Group has ventured into the insurance business after more than a decade of careful steps as a bancassurance agent, in a move that could rev up the sector but also rattle some lenders.
The Insurance Regulatory Authority (IRA) issued a licence to Equity Group yesterday, essentially allowing the lender to delve into the indemnity business, albeit, with a keen eye on group credit life and property classes – the two segments presently dominated by the likes of Absa and Co-operative Bank.
Dubbed Equity Life Assurance – the new line of business by the group will be a fully-fledged commercial entity with separate structures that will manage insurance-related products for Equity Group Holdings (EGH).
George Bodo, a banking analyst said Equity Group getting into insurance means they want to domicile premiums from those two classes and it is unlikely to acquire business outside its balance sheet.
Huge customer base
“These are businesses from its 10 million customers that were previously managed by the underwriters,” he said.
On whether the move will have a direct bearing on the overall insurance business industry, Bodo says that such a move will not in any way impact the industry as it is an “internal” transmission that may see the lender leverage on its huge customer base to boost the new business line.
The move, according to him, would also have put the bank in direct competition with investment firm Britam, which sold its 20.1 million Equity Bank shares valued at Sh852 million in June last year, ultimately cutting its ownership in the bank to a low of 6.77 per cent.
“…which partly explains Britam’s recent exit from EGH’s shareholding,” Bodo noted while reacting to the announcement through his social handle.
The bank’s entry into insurance is in line with its previous moves on setting up a financial service firm with digital subsidiary Finserve that hosts Equitel, investments and consulting which have played a key role in the bank’s recent global ranking.
Equity Group ranked 754 overall in its global ranking, by The Banker Top 1000 World Banks 2020 and 62nd in soundness (Capital Assets to Assets ratio), 55th in terms of Profits on Capital and 20th on Return on Assets in a November 2021 ranking.
Recent regulatory changes by IRA for setting up insurance corporations to ensure that each entity in the group has a distinct operational framework, including premises are moves the Commissioner of Insurance Godfrey Kiptum, believes have played a key role in attracting investments.
“We continue to receive interests from foreign based financial institutions ranging from brokers, insurers, re-insurance brokers and re-insurance companies looking for investments in the Kenyan Assurance market. This underscores the position of Kenya as a viable investment destination,” said Kiptum.
Inter-party transactions
IRA is keen to supervise inter-party transactions, capital adequacy as well as interparty transactions undertaken by regulated and unregulated businesses operating under one group banner such as with the case of EGH.
Insurance business offers opportunities for such entities and has continued to enjoy steady growth over the years with the insurance market premiums currently being valued at approximately Sh235 billion.
The market, however, remains driven by the general business category with long term insurance premiums standing at Sh 102 billion.