Pressure eases on Kenya’s general insurers as motor losses improve

Pressure eases on Kenya’s general insurers as motor losses improve

Kenya’s general insurers cut underwriting losses by 45% in the nine months ending September 2022 as the performance of motor insurance improved, with improved motor losses being attributed for the gains.

Industry data from the Insurance Regulatory Authority (IRA) showed the general insurers’ underwriting losses dropped to KES2.26bn at the end of September 2022 from KES4.13bn in the previous similar period.

The latest underwriting performance is the best nine-month performance in five years as the sector saw losses in motor insurance eased. The general insurers last posted a full year underwriting profit in 2017 when they closed with KES556m.

Workmen’s compensation class made the highest underwriting profit of KES2.48bn, further supporting the improved underwriting results.

Gross premium income for general insurers increased by 10.7% to KES134.41bn, with fire industrial posting the fastest jump (30.9%) among the major classes of insurance.

“Medical and motor insurance classes maintained a leading position in terms of contribution in general insurance business premium at 32.8% and 29.4% respectively,” said the IRA.

The underwriters saw losses in the motor private class drop by 40% percent to KES2.89bn in the nine months to September 2022 from KES4.83bn in the preceding similar period.

Losses in motor commercial also receded by 29% from KES2.48bn to KES1.75bn, helping the underwriters to post improved results.

Claims paid under motor private rose by 4.3% to KES12.12m as those under motor commercial increased by 11.6% to KES11.4m.

The reduced losses in motor insurance coincided with the period many underwriters in Kenya started pushing for increased premiums and also dropping various models of cars from their insurance.

GA Insurance, for instance, stopped offering comprehensive cover insuring several Toyota car models including Probox, Succeed, Passo, Porte and all Suzuki models valued below KES1m. Another insurer, APA Insurance, stopped insuring 28 models of Toyota, Honda, Maruti, Mazda, Nissan and Suzuki.

The insurer said it had looked at loss trends and cut out cars which have commonly been used for roles different from those disclosed to insurers.

Motor and medical classes of insurance usually account for most of the premiums for general insurers in Kenya and ultimately have a bigger say on the direction of underwriting results.

The general reinsurers also posted improved performance during the review period, with their net premium income rising by 27% from KES17.69bn to KES22.46bn as at the third quarter of 2022.

The operating profit for general reinsurance business increased by 78.9% from KES1.97bn as at the third quarter of 2021 to KES3.52bn at the end of a similar period in 2022.

The rise in operating profit was majorly contributed by Kenya Reinsurance Corporation, whose operating profit increased from KES951.47m to KES2.28bn.

Kenya’s insurers are now joining others globally in implementing the new accounting standard, IFRS 17, that is expected to impact the way numbers are reported. This kicked off on January 1 2023.

The new standard will require underwriters to take a different approach to measuring and reporting insurance and reinsurance assets and liabilities using more granular data, assumptions and models, according to PwC analysis.

“The new standard will impact many departments and functions across organisations including product design, pricing, actuary and finance,” said the PwC in the analysis authored by Anthony Murage and Akinyemi Awodumila, a partner and associate director respectively.

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