Sonarwa, the country’s oldest but troubled insurance company, is about to change ownership with reports that the Rwanda Social Security Board (RSSB) has increased its holding in the company to assume the majority position.
Speaking on condition of anonymity, a source familiar with the goings on said RSSB was in the final stages of acquiring majority stake in the company, beating off a competing bid by BK Insurance an offshoot of the Bank of Kigali.
“I am not the one directly involved in the process, Sonarwa dealt directly with RSSB. But what I can tell you is that RSSB has bought majority stake in Sonarwa; they have bought off IGI Plc,” the source said.
The changes come at the height of a crisis that saw some service providers reject clients with Sonarwa policies over unsettled claims.
Deputy Director General in charge of fund management at RSSB John Bosco Sebabi confirmed they were working on a rescue plan for the insurer, but could not divulge details.
“We are working on a rescue plan. We might or might not be in the majority. Everything will be clear once the deal is finalised. We shall then call you with the details,” he said.
The company has recently come under scrutiny over financial mismanagement, unpaid claims and multiple law suits. The company was also facing a growing crisis of confidence with some clients reporting holding paper policies that were not traceable in the computer system.
“I don’t have facts but I have heard that RSSB first wanted to conduct due diligence before making a definitive move. Bank of Kigali was interested as well, but talk to the regulator for more details,” said Jean Paul Majoro, the executive secretary for the Association of Insurance Companies in Rwanda (ASSAR).
IGI Plc, a Nigerian insurance company, became the majority shareholder when it acquired a 35 per cent stake in the company in 2008. At 16 per cent of the stock, RSSB held the second largest block of shares with the remaining 49 per cent split among by eight companies.
Subsequent capital calls saw the capital base grow in excess of Rwf3.5 billion and assets worth more than Rwf14 billion, making Sonarwa GI. the biggest and the most capitalised insurance company in Rwanda.
The most recent scandal coming out of Sonarwa involved the company’s former managing director Mawadza Nhomo, and board chairman Charles Mutsinzi Karake, who were arrested for allegedly authorising illegal financial transactions to the tune of Rwf191 million.
The two were accused alongside four others: Hubert Rumanyika, Stevenson Nzaramba, Gerard Mbabazi and Barnabas Rutagwabira.
Information from the prosecution at the time of the arrests indicated that the accused got involved in a dubious tendering process to give insurance cover to a fleet of cars belonging to the Ministry of Infrastructure, yet by virtue of Mininfra being a public entity, no commission was supposed to be paid on the transaction.
Established in 1975, Sonarwa initially operated under the management of a UK-based company called J.H. Minet. In 1980, the company’s share capital increased from Rwf50 million to Rwf500 million in 1983, which established the company as the market leader in the local insurance industry.
The exiting Nigerian owners have been accused of mismanaging the company, with some industry players welcoming the buyout but Majoro cautions that Sonarwa’s current woes were not indicative of a deep crisis.
“It could have problems but the fact that it is still operational suggests that the situation is not as bad as some commentators may make it appear,” he said.
“The regulator couldn’t have allowed it to continue operating if it was doing badly. Most of this is a result of a perception many people have that Nigerians are dubious,” said Majoro.
He said most of the concerns his office has addressed have been industry wide.
“We have addressed some issues of fraud, delayed claims raised by customers, for instance garages. We have a strategic plan to help our members,” he said.
Despite relative growth and stability, the times do not look good for the insurance sector, which has welcomed new entrants in the last few years.
Outstanding insurance claims have been growing over the past few years. Data from central bank shows that by December 2013, the sector had debts worth Rwf13 billion, this grew to Rwf16 billion in 2014, Rwf17 billion in 2015, and Rwf22 billion by September.