Just as predicted by market analysts, Uganda’s insurance sector appears set for consolidation as the market begins to witness mergers and acquisitions.
The latest is Sanlam Emerging Markets (pty) Limited’s acquisition of 50.3 per cent stake in Niko Insurance Uganda.
The move follows the sale of 49 per cent stake of Niko Group’s General Insurance Business in Uganda, Malawi, Tanzania and Zambia to Sanlam Emerging Markets (pty) Limited, a subsidiary of South African based Sanlam Group, according to a press statement issued on Tuesday.
The transaction also saw Sanlam acquire 51 per cent stake in Niko General Insurance Company Malawi, 51 per cent shareholding in Niko Insurance Zambia and 34 per cent stake in Niko Insurance Tanzania at an undisclosed amount.
Analysts including African Alliance chief executive officer Kenneth Kitariko and insurance company chiefs predicted last year that Uganda’s financial services industry that includes banks and insurance companies would witness mergers and acquisitions due to changing regulatory frameworks and requirements.
The Insurance Regulatory Authority (IRA) for instance increased the minimum paid-up capital requirements from Shs1 million for all covers to Shs4 billion for non-life insurance, Shs3 billion for life, Shs75 million for brokerage firms and Shs10 billion.
This, IRA says this was intended to create a strong industry that is capable of insuring bigger risks and all players are supposed to have raised the amount by October this year.
By late last year, less than 15 players out of the 22 in the market had complied with the minimum paid-up capital requirement.
More acquisitions IRA chief executive officer Ibrahim Kaddunabi Lubega noted that more acquisitions are expected going forward as stronger companies take over small ones to prepare bigger business.