Kenya Re invests Sh712 million in Zep-Re, subsidiary

Kenya Re has invested a total of Sh712.8 million in Zep-Re and another unnamed subsidiary in the year ended December, raising its interest in the businesses.

The Nairobi Securities Exchange -listed firm invested Sh503.4 million in Zep-Re, raising its stake in the associate to 20.38% from the previous 19.15%.

The reinsurer also invested Sh209.4 million in an unnamed subsidiary. The company’s regional subsidiaries are Kenya Reinsurance Corporation Côte d`Ivoire, Kenya Reinsurance Corporation Zambia, and Kenya Reinsurance Corporation Uganda limited.

The Ugandan unit was the latest to start operations in January 2020.

The investment disclosures have been made in Kenya Re’s abridged financial statements for the year ended December.

The company has been investing to grow its market share in the local and regional reinsurance market where it says there is increased competition as various countries establish their own reinsurers.

Zep-Re underwrites life and non-life reinsurance risks under six business lines — property, casualty, motor vehicle, marine, life, and medical.

Zep-Re’s main market is Kenya where Kenya Re also draws most of its business.

The associate’s net income dropped to $17.3 million (Sh2 billion) in 2020 from $28.8 million (Sh3.3 billion) the year before. The performance was attributed to a slowdown in premium growth, increased claims, lower investment income, and a strengthening of the US dollar against the local currency.

Kenya Re, whose net profit in the year ended December grew marginally to Sh2.97 billion after taking a Sh909.4 million bad debt impairment, has warned of increased competition in the continental reinsurance business.

“The group faces stiff competition both in its local and international markets. There has been increasing domestication of reinsurance business in some key markets, setting up of national reinsurance in countries where there were none,” the company said.

Uganda Re, in which local insurers have the biggest stake, for instance, enjoys a 15 percent mandatory cession for all reinsurance businesses in that country.

Kenya Re added that other factors raising the competitive pressure include mergers and acquisitions, increasing retention capacity of direct underwriters reducing reinsurance premiums, and creation of captive reinsurance companies which are new entrants in its target markets.

There are also unfavourable changes in legislation in some markets and price undercutting by rivals, the company said.

Kenya Re enjoys some protection in the local market where it is guaranteed 20 percent of all reinsurance premiums from primary insurers such as Sanlam Kenya and Britam.