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General underwriters slip into losses one year after raking in billions

Insurance Regulatory Authority (IRA) CEO Sammy Makove. PHOTO | FILE
Insurance Regulatory Authority (IRA) CEO Sammy Makove. PHOTO | FILE 

Insurance companies incurred underwriting losses for general business last year compared to profits the previous year, the regulator revealed Tuesday.

The net insurance loss stood at Sh226.3 million compared to Sh2.5 billion profit the previous year.

It was the third consecutive year in which underwriting profits dropped, falling by nearly half in 2014 relative to 2013.

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However, investments increased by 11.2 per cent for the general business while that for life was up by 10.27 per cent last year.

In general insurance, the investments rose to Sh112.1 billion compared to Sh100.8 billion in the year before.

The size of the life business in investments rose to Sh241.2 billion last year from Sh218.8 billion earned in the preceding year.

According to the Insurance Regulatory Authority (IRA) report for the fourth quarter of 2015, the total gross premiums for both general and life insurance stood at Sh173.26 billion with the latter accounting for Sh61.26 billion.

“This was a year-on-year nominal growth of 9.8 per cent over the period of one year. The premium income reported under life insurance business amounted to Sh61.26 billion while that under general business was Sh112.00 billion,” said the report released by the IRA chief executive Sammy Makove.

The regulator noted that the life underwriting in Kenya was still a small part compared to the general business unlike in more mature markets where the former held a larger portion of the market.

“The Kenyan insurance market continues to be largely non-life business driven unlike the world leading economies in insurance. Non-life insurance premiums contribute two thirds (64.6 per cent) of the total premiums in Kenya while life premiums contribute 35.4 per cent,” said the IRA.

The IRA said the global scene is dominated by life insurance business at 54.8 per cent and non-life insurance contributing 45.2 per cent, which the regulator termed “a more balanced position in terms of contribution by class.”

The IRA said that claims were growing at a higher rate than the premiums underwritten signalling hard times for the industry.

“Under general insurance business, incurred claims amounted to Sh49.05 billion growing by 17.1 per cent from Sh41.89 billion reported by the end of the previous year. This higher growth in incurred claims is a pointer to the much squeezed underwriting margins for the insurers,” said the IRA.

The report noted that besides claims, commissions to intermediaries and management expenses were eating deeply into insurers’ margins.

“The growth in commissions and management expenses was 17.8 per cent and 19.2 per cent respectively eating further into the much desired underwriting margins for the underwriters,” said the IRA.

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