Kenya’s insurance industry demonstrated robust growth in the fourth quarter of 2023, according to the latest report from the Insurance Regulatory Authority (IRA). The sector’s gross written premium surged by 16.7% year-over-year, reaching Kes 361.36 billion, up from Kes 309.77 billion in Q4 2022. This growth rate outpaces Kenya’s GDP growth, which the World Bank projected at 5.2% for 2023, suggesting a deepening of insurance penetration.
General insurance remains the cornerstone of the industry, contributing 52.9% of total premiums. Within this segment, motor and medical insurance classes are the primary drivers, collectively accounting for 63.1% of gross premium income. This dominance reflects Kenya’s growing middle class, increased vehicle ownership, and a heightened awareness of health coverage, particularly in the wake of the COVID-19 pandemic.
Investment income also saw a substantial uptick, growing 14.8% to Kes 54.65 billion. This increase is particularly noteworthy given Kenya’s economic challenges in 2023, including inflation pressures and currency depreciation. It suggests that insurers have adeptly navigated market volatility, possibly by diversifying into more stable assets like government bonds.
In the long-term insurance business, gross premium income (GPI) grew impressively by 19.7%. Deposit Administration and Life Assurance classes are the linchpins, contributing 40% and 24.7% to the long-term GPI, respectively. This growth may reflect a cultural shift, with more Kenyans recognizing the importance of retirement planning and life coverage, spurred by demographic changes and urbanization.
However, the reinsurance sector experienced a 4.7% contraction, with business volume dropping from Kes 34.31 billion in 2022 to Kes 32.77 billion in 2023. This decline could be attributed to several factors:
1. Risk Retention: Primary insurers may be retaining more risk, confident in their capital bases.
2. Price Competition: Global reinsurance overcapacity might be driving down rates.
3. Economic Factors: Sectors like agriculture, heavily reinsured due to climate risks, may have seen reduced activity.
Claims Experience
The report highlights that medical, motor private, and motor commercial classes had the highest paid claims. This isn’t surprising given their premium dominance, but it raises questions about profitability. High claims in motor insurance often correlate with poor road safety, while medical claims can reflect both healthcare cost inflation and an aging population.
InsurTech’s Invisible Hand?
Although not explicitly mentioned in the IRA report, Kenya’s vibrant InsurTech scene likely contributed to this growth. Companies like Lami Technologies and Turaco have been leveraging mobile technology to offer microinsurance products, making coverage more accessible. The report’s figures may partly reflect this digital-driven expansion in customer base.
Also read;https://financialday.co.ke/1690/entry-equity-bank-insurance-sector-what-it-means/
Regional Context
Kenya’s 16.7% premium growth outshines regional peers. Rwanda’s insurance sector grew by 11% in 2023, while Uganda reported around 9% growth. This disparity underscores Kenya’s position as East Africa’s financial hub, with a more mature insurance market benefiting from strong banking linkages and a larger corporate sector.
The IRA’s report paints a picture of a resilient, growing industry. Yet, challenges loom:
1. Political Risk: The 2024 U.S. elections and ongoing geopolitical tensions could impact global markets, affecting investment income.
2. Climate Change: Kenya’s vulnerability to droughts and floods may strain the reinsurance sector.
3. Regulatory Changes: Upcoming IFRS 17 implementation will alter how insurers report profits, potentially affecting investor sentiment.
On the opportunity side, Kenya’s low insurance penetration rate—around 2.3% compared to South Africa’s 12%—suggests ample room for growth. The rise of the “gig economy” also presents chances to innovate, offering tailored products for freelancers and SMEs.
Kenya’s insurance industry shows strong vital signs in Q4 2023. While growth is commendable, the evolving risk landscape demands vigilance. As Kenya cements its status as a regional insurance powerhouse, the sector’s ability to innovate and adapt will be key to sustaining this upward trajectory.
Read; https://financialday.co.ke/1667/court-stops-insurers-from-increasing-premiums/
