Market News

Higher claims, low investment cost general insurers Sh1.49bn


Medical and motor vehicle insurance have consistently emerged as the major causes of losses in the sector. FILE PHOTO | NMG

General insurers posted an underwriting loss of Sh1.49 billion in the second quarter that ended June, attributed to higher claims and lower investment income.

The loss widened from Sh1.46 billion a year earlier, according to the latest report by the Insurance Regulatory Authority (IRA).

“The underwriting performance of general insurance business was a loss of Sh1.49 billion, which was a decline from a loss of Sh1.46 billion reported in the second quarter of 2021,” the industry regulator said.

“Workmen’s compensation class made the highest underwriting profit of Sh1.45 billion while motor private and medical classes of general insurance business incurred the highest underwriting losses of Sh2.44 billion and Sh869.41 million respectively.”

Medical and motor vehicle insurance have consistently emerged as the major causes of losses in the sector, an outcome blamed on a mix of factors including fraud and price undercutting.

Gross premiums in the general insurance business grew by 8.2 percent to Sh92.3 billion in the review period from Sh85.3 billion a year earlier.

Claims jumped 14.5 percent to Sh37 billion while investment income dropped 26.5 percent to Sh4.6 billion.

The loss ratio in the general insurance sector worsened to 68.1 percent from 66.8 percent. The loss ratio refers to the benefits paid out to policyholders as a percentage of premiums collected.

Besides higher claims and reduced investment income, the general underwriters also suffered from an increase in direct expenses which, jumped 7.4 percent to Sh18.8 billion.

Insurers are among institutional investors that have seen paper losses from the decline in share prices of listed companies.

Rising interest rates on new government bonds are also lowering the value of the fixed-income securities that were issued earlier at lower rates.

Insurers have stepped their exit from the stock market to cut the impact of share price swings on their bottom-line and asset values.

Underwriters including those offering life covers, cut their holdings of listed shares to a new low of 2.8 percent of their portfolio as of June according to the IRA data.

Firms held Sh25.26 billion worth of quoted equities as of June this year, representing a decline of 23.8 percent from a year earlier when the assets were valued at Sh33.16 billion.

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