Abay to Start Insuring at End of Month

Abay Insurance SC officially received permission from the National Bank of Ethiopia (NBE) to join the insurance industry and is to become fully operational by the end of August 2010.

Abay Insurance, which is set to become the 10th private insurer in the market, submitted its application to NBE in April 2010 and was recognised as a general (non-life) insurance company on July 5.

The board of directors, which was also approved by the NBE on July 5, comprises five members with Wondwossen Kebede, a veteran fighter with the Ethiopian Peoples Revolutionary Democratic Front (EPRDF), as the chairman. Wondwossen was also one of the founders of Amhara Nation Democratic Movement (ANDM) and Wegagen Bank, of which he later became chairman.

The insurance company was founded by nine shareholders in January 2010, with a subscribed capital of 12 million Br and a paid-up capital of eight million Birr, five million Birr more than the minimum set for the formation of insurance companies.

Tikur Abay Transport, Ambassel Transport SC, and Amhara Design and Control Organisation each hold 80 out of the total of 480 shares of Abay Insurance, whose single share value is 25,000 Br, the most expensive for an insurance company to date.

"The insurance company also plans to offer public shares within two months' time," said Kassahun Begashaw, chief executive officer (CEO) of Abay Insurance. "We decided not to offer shares to the public before commencing operations, in order to build up public confidence in the shares."

However, the company has not yet decided how many shares to float or at what price, Kassahun said.

"There is no telling if the shares are actually worth that much as there are no mechanisms to determine the value of shares," said an industry expert, who did not want to be named. "As long as the company can attract clients and have the capital to carry risks, then there is enough to go around."

Although there has been growth in life and general insurance, the market has barely been touched, says the expert.

The growth is not because those already in the market are trying to draw in more customers, but rather due to the growth in gross domestic product (GDP) and import-export that has drawn clients to insurers, according to the expert.

Abay Insurance Company is currently negotiating with Africa Reinsurance Corporation, an insurance company based in Nigeria with a regional branch in Kenya, for reinsurance treaty. If an agreement is reached, Africa Reinsurance, which is working with most other Ethiopian insurance companies, including the Ethiopian Insurance Corporation (EIC), will back up Abay for high-risk insurance policies, said Kassahun.