Serial Japanese investor, Toyota Tsusho, seems to be bringing diversity to its investment table this time. Barely two months after putting some funds into Samurai Africa Fund 2 (a fund run by Samurai Incubate Inc.), the company has made its first investment in an African insurtech startup, starting with AiCare Group, Inc. (“AiCare”), a provider of telematics insurance system for insurance companies in Kenya. 

The investment which was made from Mobility 54 Investment SAS (“Mobility 54”) — a corporate venture capital subsidiary of Toyota Tsusho group established in October 2019 — was done through convertible notes. 

Why The Investor Invested

Any car owner in Kenya is required to purchase auto insurance, and approximately 3 million cars are currently insured. For single and flat rates, insurance premium rates are usually calculated depending on the value of the car, regardless of the driver’s driving characteristics and activities.

Read also:Uganda Issues First Fintech License, Which Costs Up To $2.8m To MTN, Airtel

As a result, safe drivers are thought to pay comparatively higher premiums in comparison to their driving habits and crash danger. Furthermore, single and flat insurance rates are less effective at avoiding road collisions and do not serve as an opportunity for careful driving.

As a result, relative to most insurance policies, auto insurance has become a riskier option for insurance providers.

Some countries in Sub-Saharan Africa are facing similar problems. The customized motor insurance for each driver, which is supported by real-time data on the distance traveled by each car and the driving habits of each driver, is expected to change the African motor insurance market and, as a result, minimize traffic accidents.

Investment in AiCare is therefore rather strategic for Toyota Tsusho.

Read also:How WhatsApp Business API is Changing SMEs Journey in Kenya

By accelerating the penetration of telematics insurance in the African insurance market, the investment in AiCare aims to provide higher quality insurance coverage to drivers. 

Accordingly, the Toyota Tsusho Group will assist AiCare in deploying its telematics insurance scheme throughout Africa by using its extensive automotive network. Furthermore, telematics insurance has a lot of possible synergy with the linked networks that are likely to evolve across the continent in the next few years.

“By encouraging the partnership of telematics insurance and connected networks, the Toyota Tsusho group will continue to pursue a safer and stronger mobility society in Africa,” the investor said in a statement.

Mobility 54 Investment SAS (“Mobility 54”) was founded in October 2019 by Toyota Tsusho and its subsidiary CFAO SAS (“CFAO”), a company dedicated to the investment and financing of mobility-related startups in Africa. Mobility 54 has invested more than 12 million in African startups since its inception, with the aim of accelerating the mobility-as-a-service (MaaS) market in Africa and addressing issues in the mobility sector.

A Look At What AiCare Does

Founded in 2020 by co-founder and CEO Arthur Mulwa, AiCare has developed an in-house technology that uses the automobile driving data and driving behavior data to calculate the driver’s accident risk and quantify a risk score for insurance products led by the company’s founders who have specialized AI and machine learning. Insurance companies may use the score provided by AiCare — instead of developing and investing in the technology from scratch — to offer their own telematics insurance products to its customers.

The company’s owners, who have specialized in AI and machine learning, have created an in-house technology that uses vehicle driving data and driving behaviour data to measure the driver’s crash probability and quantify a risk ranking for insurance policies. Instead of designing and investing in the technology from the ground up, insurance carriers will use AiCare’s score to sell their own telematics insurance plans to their clients.

Toyota Tsusho Is Continuing Its Preference For Investment Through Convertible Notes

Funds can be raised by companies through convertible bonds. A convertible bond is a form of borrowing by a company in which the borrowing company pays the lender fixed amount of interests or dividends until the borrowed amount is due for repayment. It is convertible because both the dividends/interests and the total amount borrowed can be converted into common stock or equity shares in the company, in this case AiCare. This conversion from the bond to stock happens at specified times during the life of the bond and is usually at the discretion of the bondholder, in this case Toyota Tsusho.

Read also:Why Mobile Technology is Important to Rural African Communities

Toyota Tsusho has mostly invested through convertible notes or bonds, including its recent investment in Data Integrated, a startup that develops and provides operation management systems for bus operators in Kenya.

AiCare Kenya AiCare Kenya

Kenyan Bus Management Startup Data Integrated Secures Funding Via Bond Issuance From Toyota Tsusho

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer