KENYA – Equity Group has announced intention to venture into long term insurance business through a separate arm subject to regulatory approvals.

The lender’s board endorsed a plan to set up a conglomerate that will oversee all insurance business for Equity Group Holdings.

“The board of directors has approved the setting up of a non-operating holding company to hold EGH’s insurance business subsidiaries and a subsidiary in Kenya to conduct and undertake long-term insurance business in Kenya,” Equity Group Managing Director James Mwangi said in a cautionary statement.

Equity Insurance Agency Ltd, the group’s fully fledged subsidiary, was licensed in May 2007 by the Insurance Regulatory Authority (IRA) to offer life and non-life insurance.

Equity now wants to put in place a fully-fledged business with separate structures and commercial arrangements that will manage insurance-related products for the group.

“The Proposed Insurance Business, including putting in place all the necessary structures, commercial arrangements and any ancillary arrangement is subject to obtaining shareholder and regulatory approvals,” he said.

Mwangi added that the arrangement, if successful, will enable the Group not only to offer competitive services but also deliver value to stakeholders.

“Until further announcements regarding the Proposed Insurance Business are made, the shareholders of EGH and other investors are advised to exercise caution when dealing in  EGH ordinary shares on the Nairobi Securities Exchange, the Uganda Securities Exchange  and the Rwanda Stock Exchange,” said the notice they released.

The move comes after the IRA issued regulations for setting up insurance conglomerates to ensure that each entity in the group has a distinct operational framework, including premises.

IRA wants to police interparty transactions, capital adequacy and interparty transactions done by regulated and unregulated businesses operating under one group banner.

Equity Group turned regional for growth, going after an ambitious multi-market entry by acquiring four banks from Atlas Mara in Rwanda, Zambia, Tanzania and Mozambique.

On the local scene, expansion of banks has been constrained by a maturing market, with over 83 per cent financially included with either an account or mobile wallet.

Equity Group’s venture into insurance is in line with its bet on setting up a financial service firm with digital subsidiary Finserve that hosts Equitel, investments and consulting.

Insurance offers a great opportunity for growth given that Kenya’s cover industry has had low penetration and now stands at 2.43 per cent of the country’s gross domestic product, a 15-year low.

The industry is skewed towards general insurance business underwriting, which contributes 57.3 per cent of the industry, of which most is motor insurance, with huge claims settlements that may have informed Equity’s strategy to target long-term products.