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Bank of Kigali insurance seeks to shake up sector

Saturday March 25 2017
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A Bank of Kigali customer is served at mobile bank truck. The lender has ventured into bancassurance. PHOTO | DANIEL SABIITI

Rwandan lender Bank of Kigali unveiled its underwriting subsidiary BK General Insurance last week, joining a sector that has lately seen incumbents struggle.

BK General Insurance, which got its licence last September and has already underwritten some 1,700 policies, is capitalised at Rwf5 billion ($6 million), five times higher than the regulatory minimum of Rwf1 billion ($1.2 million). The firm is promising a revamp of a sector dogged by price wars and rising cases of failure to settle claims.

“We have done sufficient surveys so we are coming in knowing the issues dogging the sector. I know some players are facing a number of issues and the sector currently suffers a high rate of unpaid claims, but we are just starting and it serves us well to know all this at the beginning,” said Alex Bahizi, the CEO of BK General Insurance during the official launch.

According to figures from sector regulator Bank National du Rwanda (BNR), the industry owed Rwf22 billion ($26.9 million) in outstanding claims by September 2016.

“Claims management comes from managing your underwriting and risk management. You need to underwrite reasonable policies, take re-insurance, assess your internal and external risks so that when a claim occurs you can handle it,” said Mr Bahizi.

BK is betting on bancassurance to make rapid inroads into the market, which riding on its 70-branch network will give it the advantage of lower operating costs.
Although the company is currently 100 per cent owned by Bank of Kigali, this will change soon after a Mauritian company Aprica investments Ltd finalises a deal to buy a 30 per cent stake in BK General Insurance.

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“We have already reached an agreement and both parties have already signed the deal. It is now going through regulatory approval and we have already allocated the funds. We are just waiting for the final approval,” said Andrew Lee, the CEO of Aprica.

Aprica brings 160 years of experience in insurance business to the young BK General Insurance.

“We have been looking for opportunities in sub-Saharan Africa and Rwanda is an impressive country. Partnering with Bank of Kigali, a leading institution, is a good opportunity for us,” said Mr Lee.

BK is targeting to get 12 per cent of the market by 2020 with Rwf4 billion ($4.8 million) in premiums in the first year and increasing to Rwf23 billion ($28 million)by 2020.

BK opted for non-life products like motor insurance, fire, engineering, public liability, professional indemnities and micro insurance products, while avoiding the medical insurance segment.

“We are not saying we shall not go into medical insurance, but it is a risky sector right now,” said Mr Bahizi.

Sonarwa, the country’s oldest insurance company, is in the final stages of changing ownership with recent reports showing that the Rwanda Social Security Board (RSSB) has increased its holding in the company to assume the majority position.

The move was confirmed by RSSB deputy director-general in charge of fund management John Bosco Sebabi, who added that the pension body was working on a rescue plan for the insurer.

The central bank, the sector’s regulator, recently cracked the whip on insurers who had amassed a lot of assets, which narrowed their liquidity levels — an intervention that forced many to rush into selling off their properties to get the money trapped in assets.

Insurance companies are not supposed to exceed 30 per cent of investments in real estate or immovable properties of the insurer’s total capital, excluding those for the insurer’s use, but many had exceeded this level.

“We are aware of this issue and we shall comply with the regulation,” said Mr Bahizi.