Nairobi — Kenya's UAP Insurance Company Ltd has acquired majority shares 52.99 per cent in Uganda's third largest insurer, United Assurance Company Ltd.
The move will make UAP a major player in Uganda's insurance industry while bringing United Assurance at par with other local and regional players.
"There are many benefits that will accrue from a unified branding such as easy brand recognition and association in the regional market and the enhanced confidence in our products and services," UAP Uganda chairman, Gordon Wavammuno, said.
United Assurance, the largest privately-owned insurance company in the Ugandan market, is also one of the most capitalised, with fixed assets valued at over Ush14 billion ($8.2 million) that back its outstanding record in claims settlement.
"Our financial base is now very solid, which makes us even more confident about reaffirming our commitment in Uganda and moving on to new markets in Rwanda, Tanzania and Burundi," UAP Uganda managing director Mathew Koech said.
This partnership comes in an environment of growing competition that has seen leading insurance companies moving into the previously ignored life insurance business and seeking strategic partnerships.
According to the Uganda Insurance Association chairperson, David Mukasa, the industry is growing at a rate of 25 per cent per annum.
The industry in Uganda continues to be dominated by the short term business, which makes up over 90 per cent of total insurance premiums. Penetration remains below one per cent of GDP, representing significant opportunities to grow both long term and short term business.
However, recent developments in the industry have brought with them price wars and claims leakages that have resulted in deteriorating underwriting standards.
Our steadfast refusal to join the price undercutting bandwagon saw our volumes decline by four per cent in 2006," said UAP in its latest annual report.
UAP's move to acquire shares in United Assurance is part of the company's strategy to position itself to play a more dominant role in insurance in the region and southern Sudan.
UAP Insurance opened its offices in Juba in July 2006 and in the past 10 months, has written gross premiums worth Ksh90 million ($1.3 million) and made a Ksh11 million ($156,000) profit - in a market where even the basic structures are yet to take shape.
As part of its expansion plan, UAP will launch products such as mortgage, health and life insurance that it will package to attract middle income earners across the region.
Last year, UAP Insurance Group in the region posted a pre-tax profit of Ksh814 million ($12.2 million) - a growth of 63 per cent over the previous year. Total group assets stood at Ksh7.5 milion ($111,900) - 43 per cent higher than the previous year.