Uganda insurance watchdog targets top Kenyan bosses

Tuesday July 1 2014

A UAP Insurance stand during an expo in Kampala, Uganda. Photo/Morgan Mbabazi

A UAP Insurance stand during an expo in Kampala, Uganda. Photo/Morgan Mbabazi 

By GEORGE NGIGI

Kenyan insurers operating in Uganda will have to shuffle their executive suite following a directive by the regulator to have only two expatriates in top management.

The Insurance Regulatory Authority in Uganda has directed that at least one of the top two executives of each insurance company should be a Ugandan. The authority is using the requirement to ensure home grown expertise and professionalism.

IRA Uganda will further require that at least half of the directors reside in the country. However, the association of insurers in the country has opposed the move on the grounds that the notice was too short.

“Whilst the reasons for the strategy are acknowledged, the need for a phased out approach to enable business efficiency and business continuity has been underscored,” said Uganda Insurers Association (UIA) in its recently released annual report.

Kenyan insurers operating in Uganda include UAP Insurance, which has three Kenyans in its executive management. They are Zipporah Mungai, general business MD, Anthony Githuka, chief executive of UAP Life and Patrick Ndonye, head UAP financial services.

UAP Insurance, however, said it meets the requirement after it demerged its businesses, making the three employees of different subsidiaries.

“The three are all in different companies so we are compliant,” said UAP’s chief financial officer Jackson Theuri.

Jubilee Insurance Uganda has two Kenyan executive directors.

“Our staff have been approved due to the pending demerger,” said Jubilee’s chief executive Patrick Tumbo.

Other insurers are Britam, ICEA Lion group and APA Insurance. The insurers will also be required to separate their general and life businesses, which will require them to have different capital holding for each.

Insurers have said they prefer sending their experienced staff to run the regional businesses to ensure loyalty and a uniform culture across the group.

The regional insurance markets are also young resulting in a small pool of professionals with the qualifications and experience to sit in the executive suites.

The insurers will also have to inject additional capital in the subsidiaries after the regulator quadrupled the minimum capital requirement to Sh133 million (USh4 billion) for general business and from Sh33 million to Sh100 million (USh3 billion) for life business. The new capital requirement takes effect in October.

Insurers also expect uptake in Uganda to be hit by the introduction of an 18 per cent value added tax on insurance services in the recent budget statement.

Previously, the services used to be tax exempt. Last year, the government increased the stamp duty charged on all insurance policies from USh5,000 to USh35,000.

The UIA has argued that rapid implementation of new measures would only ensure it continues to lag behind its East African counterparts in insurance uptake.

Insurance penetration in Uganda is at 0.66 per cent compared to Tanzania’s 0.8, Rwanda’s 2.4 per cent and Kenya’s three per cent.

Regional subsidiaries have become key contributors to the performance of Kenyan insurers which has seen more of them seeking to expand beyond geographical borders.

Jubilee Insurance subsidiaries contributed 45 per cent of the group’s after-tax profits last year while UAP’s regional operations contributed 24.7 per cent.

Jubilee operations in Uganda, Tanzania, Mauritius and Burundi made a total of Sh1.1 billion up from Sh894 million in 2012.

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