THE AFRICAN BUSINESS FORTUNE- INSURANCE
IRA constitute rules for mergers and acquisitions
By Dan Mganda sure they comply with new guidelines,” said IRA chief executive officer, Sammy
Insurance regulator has moved to lay ground rules for anticipated rise in mergers and buyouts in the industry to protect consumers from price fixing and small insurance providers against anticompetitive behavior.
Insurance Regulatory Authority( IRA) has signed a memorandum of understanding with competition watchdog, Competition Authority of Kenya( CAK) to track premium rates charged on insurance products, push for information sharing and reign on players engaging in underhand deals.
The authority has stamped its feet on the ground saying it will not back track plans to move the industry towards a risk-based capital( RBC) regime despite concerns by insurance firms the move would stifle their expansion plans and push them to losses.
“ We are not going to postpone the transition date. Players have a until 2018 to en-
Makove.
The new regime effective June, requires insurers to hold capital based on risks associated with businesses under their fold to ensure adequate amount of capital is left to support other operations.
The impending shift has stocked a lot of activity in the sector as the country’ s 48 Insurance firms rush to strategic investors to boost their capital reserves.
IRA said it was expecting more deal makings in the second half of the year when the rules come into play.
“ We are seeing this as a trend in the future, a lot of movements in consolidation and buy outs will rise on the back of new regulations,” said Makove.
Buy out of a 63.3 percent stake in First Assurance by Barclays Africa is latest consolidation recorded in the industry that would also see the lender injecting additional capital of Sh700 million.
Currently insurance firms are required to have a capital of Sh 300 million for life insurance and Sh 15o million for general class.
The new cash ratio will be implemented in phased approach over the next three years starting June.
CAK said it has initially allocated Sh 5 million that will support research on premium rates charged by different providers and addressing challenges of information sharing to introduce a culture of transparency and predictability in the sector.
“ Huge complains have been lodged on unquestionable conducts with consumers blaming providers for not giving them adequate information on products including pricing,” said CAK Director General, Francis Wangombe.
IRA has set next week to begin a review of premium charges on products.
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