A Djiboutian firm is set to acquire a majority stake in Kenyan sharia-compliant underwriter Takaful Insurance, following approval by the Competition Authority of Kenya (CAK), signalling a growing interest in the local financial industry by foreign firms.
Sources privy to the deal said that Djibouti’s Tamini Insurance S.A--which is associated with Salaam Investment Bank Kenya and Salaam Microfinance Bank Limited-- will pay about Sh500 million for a 65 percent stake in Takaful Insurance.
Salaam Investment Bank Kenya and Salaam Microfinance Bank Limited are both owned by Salaam African Bank of Djibouti.
The CAK allowed the transaction between Tamini Insurance S.A and underwriter Takaful Insurance on the premise that it would neither negatively impact competition in the general insurance market nor elicit any negative public interest concerns.
“Post-merger, the proposed transaction will not result in any change in the market share of the merged entity since the acquirer is not undertaking a similar business in Kenya,” said the regulator.
“...the proposed transaction will not affect the structure and concentration of the general insurance market. Additionally, the merged entity will continue to face competition from other players who control over 99 percent of the market” it added.
The regulator further said that the transaction is also unlikely to impact employment opportunities in the company, negatively affect competitiveness in small and medium enterprises, or the ability of specific industries to compete in international markets.
Takaful Insurance is one of only two Shariah-compliant insurers in Kenya, the other being First Community Takaful, backed by First Community Bank. It operates a general or non-life insurance business only. It controls a market share of 0.45 percent in Kenya.
The general insurance market is currently topped by Old Mutual, which commands 9.67 percent of the market, followed closely by Britam and APA with 8.91 and 8.76 percent shares, respectively.
Takaful Insurance is privately owned by shareholders, among them CIC Insurance Group, Hass Petroleum, Allamagan Ventures, Omash Investments, Koromey Kommunications, Soliton Investment Company, Luxor Trading Company and three individuals.
The latest data from the Insurance Regulatory Authority (IRA) shows that it made a loss of Sh15.5 million in the quarter to September 2024, a downturn from the profit of Sh6.9 million it made the previous quarter.
Its filings with the regulator indicate that its leading business segments are private and commercial motor insurance, industrial fire, theft and workmen compensation. It collected premiums totaling Sh742.8 million and paid claims amounting to Sh303.5 million.
The insurance industry in Kenya is currently facing headwinds of low spending power among consumers, forcing players to repackage products to curb opt-outs.
Most insurance companies are for instance increasingly repackaging their products to allow for installment payment of premiums in a move to avert surrenders and withdrawals in the wake of increased State deductions.
IRA data shows surrenders in the nine months ended September 2024 hit Sh11.5 billion, marking a growth of more than double from Sh4.66 billion posted in the prior similar period. Surrenders occur when customers discontinue payment of premiums on their policies.
