Kenya Industry Research: Insurance

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Changes in Kenyan Insurers investment allocations expected to improve stability in capital and earnings
  • Kenya Industry Research: Insurance
  • Year : Aug 2021
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Summary

The core business of insurance companies is providing risk cover in exchange for premiums, with investment income (generated by shareholder and policyholder funds) feeding into earnings below underwriting level. Intense price competition in the Kenyan insurance market (both short and long term) has resulted in slow growth (5-year CAGR1: 6.2%). This has resulted in increased underwriting pressure as the fixed cost base remained stable or grew in certain cases, limiting margin progression.

Additional Information

Over the five-year review period, the Kenyan stock market (NSE) has demonstrated a significant decline in performance, resulting from various factors including re allocation of funds to fixed income securities following the global commodity crash, increased government spending, introduction of capital gains tax, and prolonged elections in FY17. As such, the NSE 20 share index recorded a decline from 3562 points in FY16 (with a high of 4009 and low of 3179) to 1968 points in FY20 (with a high of 2600 and low of 1760). On account of this, the majority of the insurance companies had to write down the values or incur losses on disposal of these securities, to the extent of registering overall net losses for the entities that had significant exposures.

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