Jubilee eyes strong firms in strenuous market

Top insurer Jubilee is keen to consolidate on its market position in underwriting through mergers and acquisitions.

This as the insurance industry remains under the cloud of turbulent pressures.

The insurer expects the combination of a tough going business environment and tightening regulatory requirements to spark the run on mergers and acquisitions as sector players seek to remain a float in an ever shifting industry.

“We are already looking at three or four companies with a view to acquire. This would not only be in our interests but also in those of the industry.

“This would exactly happen in a way as it were in the banking industry. If there are five or six strong firms, this would help to consolidate. The regulator is already making the right noises with some of us,” Jubilee Holdings Chairman Nizar Juma said.

Jubilee Holdings expects its strong balance sheet position to provide stimulus to the market consolidation drive.

This is characterized by the dwindling growth forecast for the majority of its peers in the industry.

It is attributed to a mix of multifaceted headaches including a notable slowdown in both the stock and real estate markets.

Further to the business related issues which ended with the insurance industry on its knees in 2018, underwriters are expected to abide by new capital requirements beginning 2021 forcing a tectonic shift to the shareholding structure of firms.

“You’re likely to see a lot of consolidation from next year. The regulator will certainly give guidelines and offer incentives for consolidation. I would anticipate a raft of incentives to encourage the consolidation measures,” said Jubilee Regional C.E.O Julius Kipng’etich.

By 2021, general insurance practitioners are required to have a minimum capital provision of Ksh. 600 million from the current threshold of Ksh.300 million while life guarantors will meanwhile be required to be capitalized to the tune of Ksh.400 million.

Composite insurers will further require stocks of at least Ksh.1 billion to remain in business upon the expiry of the deadline to the new requirements.

A majority of insurers however find themselves operating beneath the current capital requirement ratios under burgeoning underwriting ineffeciencies as represented by recently published sector statistics from the Insurance Regulatory Authority (IRA).

According to the regulator data from the fourth quarter of 2018, general insurers incurred a near quadruple dip in earnings from underwriting to Ksh.397.9 million as a higher accumulation of claims estimated at Ksh.10.9 billion and greater expenses took a toll on the firms’ earnings.

On its part, Jubilee Holdings represents a handful of underwriters who operate comfortably above the regulatory capital requirements represented in paid up capital amounting to Ksh.3.5 billion in five of its regional markets to include Kenya, Uganda, Tanzania, Burundi and Mauritius against Ksh.1.7 billion in regulator requirements as at December 31, 2018.

In Kenya, Jubilee is set to split its underwriting business into three subsidiaries- medical, general and life to improve on operational efficiencies even as the insurer continues to adopt a derisking strategy anchored on revenue diversification.