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Kenya’s Jubilee Insurance eyes Ethiopia expansion with Allianz

By David Whitehouse
Posted on Wednesday, 28 April 2021 19:14

Nizar Juma, chairman, of Jubilee Holdings. Photo supplied.

Jubilee Insurance in Kenya aims to extend its partnership with Germany’s Allianz to penetrate underinsured Ethiopia.

The Ethiopian government has signalled that Jubilee, East Africa’s largest insurer, will be allowed to enter the country once financial services are opened to foreign companies, Chairman Nizar Juma tells The Africa Report.

“Once the financial sector starts to open, insurance will be the next step,” Juma says in Nairobi. “Ethiopia is a very good market. We will talk to Allianz to see if they want to enter.”

The World Bank has been asking the Ethiopian government to open up financial services, Juma says. “I think it is going to happen.”

Prime Minister Abiy Ahmed has taken steps to partly open the telecommunications, transport and logistics and power sectors. Progress has been stalled by Covid-19 and by conflict in Tigray, but some international banks have set up representative offices in a bid to be ready for financial liberalisation. Juma says he expects the market to be open within the next two years.

Allianz has previously signalled that it’s eager to enter Ethiopia. The German insurer bought control of Jubilee’s general insurance businesses in Kenya, Tanzania and Uganda in September 2020. Jubilee kept ownership of its life and pensions operations and its medical insurance businesses in Kenya, Uganda and Tanzania.

Insurance penetration in Ethiopia lags behind that of sub-Saharan Africa (SSA), with penetration as a share of GDP at 0.4% in 2017 versus an SSA average of 3.5%, according to the World Bank.

  • State-owned Ethiopian Insurance Corporation, which until 1994 enjoyed a monopoly, still deals with most state insurance needs and accounts for 23% of the industry’s capital.
  • Per head spending on insurance is around $3 compared with $40 in Kenya, the World Bank says. Most of the policies that do exist are targeted at the corporate market, with premiums from the retail sector mostly derived from compulsory motor insurance.
  • Jubilee has the financial strength to fund expansion to Ethiopia, Juma says, pointing to an unbroken record of dividend payments going back to 1984 and an absence of tapping shareholders through rights issues.
  • “If we were to go to shareholders to fund expansion, they would welcome us with open arms,” Juma says.

Corruption in DRC

Jubilee is an affiliate of the Aga Khan Fund for Economic Development (AKFED), which holds a stake of 38%. Juma, now aged 77, has been whittling down his portfolio of board roles from a peak of 50 to about 20 now. He carries out his non-executive role with Jubilee on a voluntary basis.

“We didn’t need the money” from the Allianz partnership, Juma says. “We want to learn state of the art digital methods,” as well as artificial intelligence (AI) and fraud detection methods, he says.

Educating the consumer is the key to raising insurance penetration in East Africa, he argues. “People don’t believe that insurance is a necessity. They think it’s a luxury.”

  • Juma sees the Democratic Republic of Congo (DRC) as another possible entry target but is more cautious because of what he describes as an “extremely corrupt” environment.
  • “It’s not a question of money. It’s a question of the mechanics of working there,” he says. The board has decided to wait and see how the DRC insurance sector evolves. “We are watching.”

Bottom line

Expect Allianz and Jubilee to make a move into Ethiopia as soon as it becomes legally possible.

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