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Bunna Insurance announced that it will float new shares to the public at the end of this month.
Even though it has only been providing services since last October it plans to increase its capital to 100 million birr by selling the new shares.
Kassahun Begashaw, executive officer of marketing and business development for Bunna Insurance, said that the shareholders held an extraordinary meeting on November 23, 2013 a decided to expand the insurance company’s subscribed capital to 100 million birr.
“Based on the accord passed by shareholders in November the company will open new shares to the public in late January,” Kassahun told Capital.
He said that according to the country’s law, before Bunna Insurance floats a new share the current 237 shareholders must pay the previous share which was 13 million birr in subscribed capital by January 25, 2014.
“Currently, we are in the final stages of fulfilling the subscribed capital payment,” he explained.
The insurance firm expects to meet the National Bank of Ethiopia’s (NBE), the regulatory body for financial institutions, requirement by 2015. The recently endorsed NBE directive indicated that insurance firms providing general insurance must meet the paid up capital of 60 million birr by 2015 and if they include life insurance as a product then they must add 15 million birr to their paid up capital.
“At the very least we will meet the 60 million birr requirement by the end of the deadline the NBE set,” the marketing and business development executive officer head confidently added.
“Currently, our operation is focused on the general insurance business. But after we sell the new shares we will begin providing life insurance,” Kassahun said.
According to the marketing and business development head, the insurance company’s goal was to finish the year without a loss. Most of the new financial institutions lose money during their first year. Bunna Insurance was formed in August 2011 with 10 founding shareholders.
Experts stated that the insurance business is still weak compared with other East African countries. Their recommendations include expanding their markets by providing a diverse array of products. When they are able to do this much of the country’s population will want to become insured.
Bunna Insurance elected the prominent lawyer Zewdu Minas to chair the board about a year and half ago. It has become Ethiopia’s 16th private insurance firm. About two decades ago the state owned Ethiopian Insurance Company was the lone firm providing services.
Bunna secured its license from NBE last May. It now has two branches in Addis Ababa including its main one in Arat Kilo. It plans to open two more by June, one in Addis and another in an undisclosed regional town.
“Our business strategy is different from others, we have a plan to expand branches in areas that do not have sufficient access to insurance,” Kassahun explained.
The spokesperson for Bunna said that the main challenge the firm is facing is lack of experienced professionals. This is especially difficult for banks and insurance companies that are new.
Kassahun said that new companies who do not have strong financial capacity are forced to compete with more established institutions in order to lure professionals with an attractive compensation package.
“This is damaging for new entrants, because they have to pay a competitive salary for professionals and there are many financially strong companies out there,” he added. There is a scarcity of trained professionals and so the competition to attract them is fierce. Kassahun also pointed to high rental prices as another issue the industry faces.
Bunna International Bank, which is considered to be a sister financial firm to Bunna Insurance, and two additional individuals have the maximum share allowed by NBE. The two individuals each have a five percent share, which is the maximum personal holding allowed in an insurance firm.