Swan Insurance Company paid Rwf1.5 billion for the 30 per cent stake.
Leading insurer in Mauritius Swan Insurance has bought a 30 per cent equity stake in BK General Insurance, increasing the chances of expanding a concentrated insurance market in the country.
Rwanda Today understands that Swan Insurance Company paid Rwf1.5 billion for the 30 per cent stake for the insurance business arm of Bank of Kigali Group.
“Swan Insurance is not only bringing in equity but also expertise as the company has over 100 years experience in the insurance business,” said Diane Karusisi, CEO Bank of Kigali Group.
“We have signed a shareholder agreement as we wait for regulatory approval,” she added.
Swan General has bought shares in insurance firms in Rwanda, Zambia and Zimbabwe as part of plans to grow its African footprint. The companies include Diamond General Insurance in Zambia and Alliance in Zimbabwe.
Part of the $60 million- $70 million Bank of Kigali plans to raise through a rights issue in October will be used to recapitalise BK General Insurance — a move that is expected to position the insurer to handle bigger business as well as settle claims on time.
It is hoped that the Swan Insurance-BK Insurance partnership will reduce the dominance of a few players in the insurance sector and also increase penetration rates.
Currently, the insurance market in Rwanda is dominated by public medical insurance providers Rwanda Social Security Board and Military Medical Insurance, and a few private insurers led by Soras.
Data from National Bank of Rwanda shows the combined assets of the 16 insurance players reached Rwf399.8 billion in December 2017. However, the two public medical insurance providers control 62.2 per cent of the market, which amounts to Rwf249 billion of the assets.
Industrial players say Soras Group’s life and general is the market leader in the private insurance market, after it generated almost 83.3 per cent of the private insurance profits from January to December 2017.
Data from the central bank shows that combined the 14 private insurers generated Rwf3 billion in profits, with Soras Group making Rwf2.5 billion.
However, industry experts say majority of Soras Group’s profits were generated from its other business including its commercial properties and other class assets.
The analysts say the biggest challenge facing the insurance sector is weak underwriting, price undercutting and high claims rations especially in motor insurance — the sector’s cash cow.
Underwriting losses
National Bank of Rwanda shows the net underwriting losses stood at Rwf4.3 billion, which is 62 per cent of total private insurers’ underwriting losses in 2017.
Over the past 10 years, the insurance sector has seen various mergers, acquisitions and partnerships.
For instance, South African insurer Sanlam bought Soras Rwanda, Green Oaks, USA Cogear while Saham Group, Morocco bought Corar Rwanda.
State-owned Sonarwa Insurance was acquired by IGI Plc, Nigeria, and is currently 100 per cent owned by Rwanda Social Security Board.
The market also has several Kenyan insurance firms like UAP, Britam and Phoenix. Currently, the only remaining Rwanda insurance company is Radiant.
The insurance penetration in the country stood at 1.7 per cent as of December 31, 2017, a slight growth from 1.6 per cent in December 2016. This reflects positive growth prospects through regulatory reforms and self-policing.
The insurance sector registered a slight growth in gross written premiums relative to adult population. It improved from Rwf16,475 to Rwf18,536, according to National Bank of Rwanda.