Resolution Insurance has slipped further into the red, reporting a Sh424.9 million net loss for the period to December 2016 from the previous year’s Sh335.6 million loss.
The firm was impacted by changes in its reinsurance agreements, which saw the business write off Sh176 million in historical balances and a further Sh119 million after re-aligning its reinsurance commission accounting policies.
Without the effect of these one-offs, Resolution – which has a presence in Kenya, Uganda and Tanzania -- says it would have made a net loss of Sh288 million last year and Sh246 million the previous year.
“Following reconciliations with the 2015 panel of reinsurers, it was determined that the accounting treatment of the 2015 insurance treaty did not properly reflect the provisions of the agreement,” Resolution said in a statement.
“As a result, the company wrote off historical reinsurance balances amounting to Sh176 million, out of which Sh127 million resulted in a restatement of the prior year’s reported numbers.”
Reinsurance is a practice in which insurance companies reduce their liabilities by transferring part of the risks associated with a policy it has underwritten to another insurance firm.
Kenya Re is the largest reinsurer in the country and all insurers are mandated by the law to book a fifth of their reinsurance business with the State-owned company.
Resolution’s gross written premiums grew 32.7 per cent to end the year under review at Sh3.9 billion.
Following receipt of regulatory approval to expand its general business last year, this particular line saw its gross written premiums increase by Sh184 million to Sh308 million.
The business’ net claims during the period increased eight per cent to Sh867.31 million even as the premiums paid out to its reinsurers also went up 39.5 per cent to Sh2.6 billion, reflective of the expanded business.
Resolution however marked improved earnings from its investments as they increased by Sh58 million to Sh111 million.