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German public investor, DEG, has bought into pan-African reinsurer, Zep Re, underlining the growing interest in Kenya’s insurance industry.
DEG bought an 11 per cent stake at an estimated Sh1.3 billion. Zep Re is majority owned by Kenya Re-insurance Company and is based in Nairobi.
“New shares were created to bring them on board so there was dilution of existing shareholders,” said a source within the company who is however not authorised to speak to the media.
The company’s managing director is currently out of the country. Kenya Re’s stake in Zep Re is expected to drop from 21 per cent to 16 per cent following the entry of DEG and African Development Bank which took a 14.5 per cent stake in 2012.
Nigerian based Continental Re has also declared intentions of injecting additional capital in its Kenyan subsidiary as it seeks to absorb more risk in the region.
“From the way the company has grown we know we will be needing more capital very soon. We will see how much,” said Continental Reinsurance Group CEO Dr Femi Oyetunji.
The reinsurer converted its branch in Kenya to a subsidiary in 2012.
He said the firm intends to develop the life side of its business and is currently looking for additional human skill to join its local operations.
Dr Oyetunji said that Continental Re, listed at the Nigerian stock exchange, had already received shareholders’ approval to raise additional capital by end of year.
Reinsurers are also recapitalising in anticipation of increased business from the nascent oil and gas sector across the East African region.
Investor appetite for insurance companies has been growing, driven by increased uptake of social security products such as life insurance, education policies and retirement schemes.
DEG has in the past had a preference for the banking sector with exposure in Co-operative Bank, Equity Bank, I & M Bank and most recently Chase Bank. Its other investments include Rift Valley Railways and IPS.
Kenya’s financial sector has been growing on the middle class’ demand of products. This saw the number of persons accessing life insurance hit 1.4 million in 2013, up from one million in 2009, according to the latest Financial Access survey.
Private equity firm Leapfrog has also declared interest in Kenya’s insurance sector after raising Sh17.3 billion for investment across Africa.
– Business Daily