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Insurers in first loss from underwriting in 11 years

Sunday April 14 2019

Invited guests look on during the UAP Group critical illness

Invited guests look on during the UAP Group critical illness event panel discussion at the Radisson Blu on October 9, 2018. FILE PHOTO | NMG 

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Insurance companies chalked up an underwriting loss of Sh1.65 billion last year, making it the biggest in more than a decade as the industry struggled under post-General Election economic jitters.

It is also the third loss since 2008 with the other loss years being 2015 and 2016.

Underwriting income is the difference between premiums collected on insurance policies by the insurer and expenses incurred and claims paid out.

In 2017, the industry made an underwriting profit of Sh556.18 million, which was, however, the lowest earnings since 2009 – except for the years that the firms made a loss.

The total after-tax profit in 2018 also fell to Sh6.82 billion compared to Sh11.05 billion, amounting to a 38.28 percent decline. This came against higher claims – 3.5 percent up to Sh56.78 billion – and higher management expenses that stood at Sh42.64 billion or 7.1 per cent up compared to the previous year.

“There was no recovery for the industry after the General Election and the two presidential elections. The premiums from such industries as construction were at a standstill or down. The insurance industry is always on the receiving end when the economy is struggling,” said Isaac Ng’aru, an insurance industry expert.

Mr Ng’aru said there has also been such unhealthy competition in the industry in recent times to the extent that some companies have drastically cut prices of their products, leaving themselves exposed to loss.

Besides the underwriting loss investment income was down 6.7 percent to Sh29.02 billion. Underwriters put more of their money in low-paying bank deposits which increased 34.41 percent to Sh20.81 billion as investment in government securities, for example, stagnated and that in quoted ordinary shares fell by 15.22 percent to Sh7.43 billion.