The insurance industry in Kenya experienced a slow growth of 6.5 per cent in the year ended 31 December 2017 compared to a growth of 13.4 per cent recorded in 2016. This is according to a report released today by the Association of Kenya Insurers (AKI).
The report notes that insurance premium grew slightly to Ksh209 billion in 2017 from Ksh197 billion in 2016. The net claims paid out to policy holders was Ksh99.13 billion compared to Ksh85.41 billion in 2016.
AKI Chairman Hassan Bashir attributes the slowed growth to prolonged election period, slowdown in private sector credit growth and drought in the first half of the year.
“The Kenyan economy faced several headwinds in 2017. Drought in the earlier half of the year, slowdown in private sector credit growth and a prolonged election cycle. However, these headwinds were partially mitigated by the recovery in tourism, better rains in the second half of the year, low global oil prices, and a relatively stable macroeconomic environment. GDP growth slumped to 4.8 per cent in the first half of 2017 and 4.9 per cent by end of the year,” says Bashir.
Insurance penetration, which is calculated by dividing gross insurance premium by the GDP, was at 2.71 per cent compared to 2.75 per cent in 2016.
Marine insurance recorded the highest growth at 41.56 per cent. This growth was mainly buoyed by the implementation of the government directive to locally insure all marine cargo starting January 1, 2017.
Engineering Insurance recorded the second highest growth at 15.84 per cent. This insurance class covers construction, installation and erection projects, machines and equipment as well as third party liabilities. This growth can be attributed to the expansion of infrastructural projects in the country.
Agriculture insurance also performed well with an increase in gross written premium to Ksh822.7 million in 2017 compared to Ksh548 million in 2016. Livestock insurance accounted for 63.13 per cent of this premium. Government premium subsidies for crop and livestock insurance for the year 2017 was Ksh157 million and this figure is expected to increase in 2018.
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Personal accident (-9.08%), motor commercial (-3.33%) and medical insurance (-0.71%) recorded negative growth rates during the year under review. Medical insurance has been one of the fastest growing classes since 2013. The medical claims increased by 14.64 per cent to Ksh20.56 billion in 2017 compared to Ksh17.94 billion in 2016. Conversely, the loss recorded in 2017 was Ksh514 million compared to Ksh782 million in 2016, a slight improvement in overall performance.
Life insurance business made up 40 per cent of the total premium written by the industry at Ksh83.65 billion. In the developed markets, life insurance forms the larger portion of industry premiums. Life insurance growth has almost doubled over the last five years from Ksh44 billion to the current Ksh83.65 billion.
Deposit administration or pension schemes was the best performing life insurance category at 35 per cent followed by group life at 29.75 per cent. Other categories were ordinary life and investment/unit linked products respectively.
Bashir is optimistic that the industry is going to pick even as government puts measures to accelerate economic growth.
“Interesting times lie ahead for the insurance industry. There is a raft of legal changes in the works aimed at making the market more robust including the ongoing implementation of the Risk Based Capital (RBC) regime. We are also poised as an industry to play a key role in the Government’s Big 4 agenda,” says Bashir.
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