UAP Insurance is eyeing to close an acquisition deal in Rwanda before December as its seeks to reduce its reliance on the Kenyan market.
The insurer has opted for a buyout to avoid fighting for marketshare against established rivals, hiring local staff, cultural barriers and seeking regulatory approval.
"We want to make a quick entry there and we have opted to buy into an existing company because of the time involved in building a brand in a new country," Mr James Muguiyi, the chief executive of UAP Holdings without giving details on the targeted insurer.
"We have made progress with the negotiations and the deal will be concluded in the next few weeks," added Mr Muguiyi.
It will become the first Kenyan company to enter the Rwanda market and its move to Kigali is expected to spur interest from local insurers who have focused their attention on Uganda.
Rwanda will be the third country where UAP has presence after South Sudan and Uganda. The company plans to expand to Democratic Republic of Congo and Tanzania next year.
While the Rwanda insurance market is relatively small compared to Kenya's but offers vast growth opportunities for new entrants on reduced competition, said Mr Muguiyi.
Unlike Kenya that has 50 insurance companies sharing a net underwriting profit of Sh7.2 billion, Rwanda only has eight.
As a result, undercutting is rife in the Kenyan market, squeezing the margins of underwriting profit for companies.
As a result, players Jubilee, CIC, ICEA and APA are increasingly looking at the regional market to maintain profit growth.
But the model of opening subsidiaries is shifting to acquisition from starting operations from scratch as they seek to break even within shorter periods.
The regional market is becoming increasingly important as the East African Community (EAC) common market takes shape following its kickoff last January, opening way for free movement of factors of production in a market of 126 million people.
As a result, UAP is increasingly looking at growing clients with business interests across the East Africa countries including Tanzania, Rwanda, Uganda and South Sudan.
Its net profit stood at Sh634 million in 2010 compared to Sh199 million in 2009, and it's looking at the regional property and insurance market to maintain the profit growth. (Read: UAP eyes real estate deals with new investment plan)