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Kenya’s Insurance Sector Q1 Net Profit Declines 73.7% to Kshs 0.4 Bn

The insurance sector suffers from a low penetration rate, standing at 2.3% at the end of 2021, lower than the global average of 7.4%.

Insurance Regulatory Authority Open Day in Kisii County. PHOTO Jun 9, 2021

Insurance Regulatory Authority Open Day in Kisii County. PHOTO Jun 9, 2021

Kenya’s insurance sector’s net profit declined by 73.7% to Kshs 0.4 billion for the period ending March 31st, 2022, compared to Kshs 1.5 billion recorded in Q1’2021. 

According to the Insurance Regulatory Authority of Kenya (IRA)  Quarterly Insurance Industry Report, the decline was mainly attributable to a 10.3% increase in claims incurred to Kshs 18.4 billion in Q1 ‘2022, from Kshs 16.7 billion in Q1 ‘2021. In addition to a 10.9% increase in management expenses to Kshs 11.6 billion, from Kshs 10.5 billion in Q1’2021. 

The industry’s gross premiums rose by 11.6% to Kshs 88.4 billion, from Kshs 79.3 billion recorded in Q1’2021, with the general insurance business contributing 61.0% of the industry’s premium income, a 0.2% point decline from the 61.2% contribution witnessed in Q1’2021. 

The insurance sector has continued to suffer from low penetration rates, standing at 2.3% at the end of 2021, which is significantly lower than the global average of 7.4%, mainly attributable to low disposable income in the country and a lack of awareness amongst most people. 

As such, the insurance core business remains unprofitable, as evidenced by the general insurance’s combined ratio of 101.9% in Q1’2022, which translated to an underwriting loss of Kshs 0.5 billion. 

On the upside, the sector has continued to witness increased adoption of technological tools in providing insurance services and delivering innovative insurance products, which has positively impacted the outlook. 

Cytonn Investments expects the insurance sector to record gradual improvements following the continued economic recovery evidenced by a 6.8% growth in Q1’2022, up from the 2.7% growth recorded in Q1’2022, highlighting an improving economic environment. 

However, risk abounds in the positive outlook on the back of high loss ratios and declining investment income due to poor performance of the various asset classes, which are likely to lead to constrained profits.


 

Experience working on communication and marketing departments and in the broadcast industry. Interested in sustainable development and international relations issues.

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