Outstanding insurance premiums increased by 15.5 per cent in six months from Sh45.25 billion at the end of December 2022.
Section 156 of the Insurance Act obligates insurers to only recognise risks coming from customers whose premiums they have received.
Businesses and individuals are exposed to losses despite spending Sh52.25 billion on insurance premiums, highlighting the growing challenge of delays by intermediaries such as brokers and agents to remit the money to insurance firms.
Latest data from the Insurance Regulatory Authority (IRA) up to June 2023 shows outstanding premiums increased by 15.5 per cent in six months from Sh45.25 billion at the end of December 2022.
This means that the risks worth hundreds of billions of shillings are not recognised under the “cash and carry” principle, which stipulates that if the insured suffers loss before the premium is remitted then there is no compensation.
Section 156 of the Insurance Act obligates insurers to only recognise risks coming from customers whose premiums they have received.
“No insurer shall assume a risk in Kenya in respect of insurance business unless and until the premium payable thereon is received by the insurer,” states the Act.
Unremitted premiums also hurt the liquidity of insurers and reinsurers, compromising the ability to honour claims without a struggle.
Of the outstanding premiums, Sh41.29 billion are related to general insurers while Sh10.95 billion was owed to long-term insurers at the end of June 2023.
Long-term insurers
GA General Insurance closed June last year with outstanding premiums in its books at Sh3.62 billion while that of CIC General and Old Mutual General were at Sh2.27 billion and Sh2.12 billion in the period. At least 17 insurers and reinsurers were each owed at least Sh1 billion.
Pioneer Assurance Company’s outstanding premiums were Sh3.04 billion —the highest among long-term insurers— followed by Britam Life (Sh1.59 billion), Old Mutual Life (Sh861 million) and Jubilee (Sh826 million).
Outstanding premiums had escalated to Sh41.77 billion in 2019 and dropped to Sh35.73 billion at the end of 2020 after the regulator warned intermediaries that it would not renew licence for failure to remit premiums.
The figure has, however, been building up for the last three years.
The IRA data for the end of 2022, for instance, showed 30.3 percent of the outstanding premiums were in the hands of brokers while agents held 26.7 percent. Insurers were holding 18.1 percent of reinsurers’ premiums.
Some insurance firms have been delaying payments to reinsurance firms, who assist in settling a share of larger and riskier claims, pointing to the extent of the problem of outstanding premiums in the sector.
The gross income premium of general insurers grew by 13.7 percent to Sh105.04 billion in the period under review.
