Crop insurers feel the heat with over Sh131m total loss

Agriculture insurance proved tricky, with seven underwriters posting a cumulative loss of Sh131.9 million.

Kenya Orient Insurance and Heritage Insurance were the worst hit, posting Sh6.89 million in underwriting losses last year, meaning, they paid out more money in claims than they received in premiums.

Data from the Association of Kenya Insurers, AKI shows that agriculture insurance suffered a loss ratio of 48 per cent — or claims worth Sh131.9 million — compared with cumulative gross premiums of Sh272.7 million.

The association attributed the performance to the fact that agriculture insurance is still fairly new in Kenya.

“The players have not adequately spread their risks to cushion themselves from the vagaries of weather,” AKI boss Tom Gichuhi said.

The agriculture insurance section is facing a shortage of loss adjusters, he said, a fact that has seen most players shy away from providing insurance cover for crops and livestock.

“The industry does not have adequate underwriting capacity due to shortage of agronomists trained in agriculture insurance cover,” Mr Gichuhi said.

NEW INDEX
Insurers started underwriting crops and animals four years ago. To date, there are only seven major players out of 36 firms in general insurance.

Besides Kenya Orient and Heritage insurance, the other players are Jubilee, APA, CIC, UAP and ICEA-Lion group.

Figures from AKI show that ICEA-Lion was the best performer, returning a profit of Sh3.75 million — the lowest loss ratio: 5.1 per cent.

It was followed by APA, which registered a profit of Sh33.8 million — a loss ratio of 7 per cent.

Last year, APA launched a new index-based weather insurance product targeting maize farmers in 10 counties in Central and Eastern Kenya in partnership with Freshco Seeds and mass-market insurance service provider MicroEnsure.

Since April this year, the insurer has also been in partnership with the International Livestock Research Institute and World Vision Kenya, providing index-based animal insurance cover.

While index-based insurance seems to bear fruit, AKI says the country lacks reliable historical weather statistics, thus limiting the full utilisation of this form of insurance.

“To adequately provide index-based insurance, you need reliable climatic data,” Mr Gichuhi said.

HEAVY LOSSES
Heritage Insurance paid out Sh5.5 million in claims, compared with Sh2.3 million in gross written premiums, representing a loss ratio of 176 per cent.

Kenya Orient paid out Sh1.01 million in claims in comparison with Sh0.72 million in gross written premium, a loss ratio of 140.1 per cent.

“The overall performance of 48 per cent loss ratio is reasonable in the sector, but any loss ratio above 70 per cent is unsustainable,” Mr Gichuhi said in a telephone interview.

Both UAP and CIC registered loss ratios of 54 and 53 per cent, respectively, compared with the industry average of 59 per cent.

AKI also attributed the mixed performance to the fact that some players have concentrated in high-risk regions.

Last year, maize farmers in Trans Nzoia suffered losses estimated at Sh53 million following heavy hailstorm.

In the Rift Valley last year, farmers suffered losses due to a viral disease, the Maize Lethal Necrosis, which wiped out the maize crop.