FAKE LUXURY?: Wreckage of a car at an accident scene Image: FILE Underwriters in the country are still faced with increased claims eating into their profitability and increasing expenses as Covid-19 continues to slow down the economy.
According to the latest claims report released by the Insurance Regulatory Authority (IRA), insurers received over 2.1 million claims in the second quarter of 2021, a 19 per cent increase compared to the first quarter of the year (1.7 million).
The increase in claims is illustrated by a 64 per cent dip in profit at Kenya Reinsurance Corporation in its half year results, meaning the firm shouldered more heat from the insurance firms.
Kenya Re reinsures several insurance companies in Kenya and Africa.
Reinsurance companies help insurers spread out their risk exposure.
Insurers pay part of the premiums that they collect from their policyholders to a reinsurance company, and in exchange, the reinsurance company agrees to cover losses above certain high limits.
The re-insurer posted a Sh762million profit down from a Sh1.6 billion profit posted in the same period last year.
Analysts from Standard Investment Bank noted that higher claims during the period accounted for the drop in profitability.
The re-insurer’s claims increased 22 percent to Sh6.283 billion, up from Sh5.148 billion during the same period last year.
Cedent acquisition costs increased by 3 per cent from Sh2.146 billion in June 2020 to Sh2.215 billion in June 2021 .
A cedent is a party in an insurance contract who passes the financial obligation for certain potential losses to the insurer.The increase in the cedent acquisition costs means Kenya Re had to incur more financial costs in the period to pay the premiums of all insurers.This saw gross written premiums grow by 6 per cent from to Sh9.59 billion in June 2021 compared to Sh9.074 billion in the same period last year.Net earned premiums grew by 0.3 per cent to Sh8.689 billion from Sh 8.660 billion last June.Kenya Re’s asset base however during the period grew 2 per cent increased from Sh53.24 billion as at the end of 2020 to Sh54.24 billion as at in the first half of 2021.An analysis of various insurer’s half year results shows that the continued increase of claims resulted in either profit drop or increased operating expenses.Sanlam Kenya posted a dip in earnings posting a Sh291.8 million loss in the first half of the year, up from a Sh99.1 million loss posted in the same period last […]