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Insurers now cast their net wider for growth

AKI Chairman Justus Mutiga (L) and Executive Director Thomas Gichuhi: The insurance Sector recorded low penetration levels

The insurance industry has announced a subdued pre-tax profit of KES 18bn in 2013 and identified low income earners, the energy, real-estate and infrastructure sectors to drive its growth.

Although profits increased to 3.44pc in 2013 compared to 3.16pc, equivalent to KES 15bn in 2012, the Association of Kenya Insurance (AKI) Chairman Justus Mutiga said overall penetration was still low.

“This low penetration highlights the significant opportunities that exist in the Kenyan Insurance market, especially in commercial lines such as oil, real estate and infrastructure,” said Mr. Mutiga.

Mr. Mutiga’s observation is underscored by significant developments in these three sectors, where government is encouraging private public partnerships and has book- marked them as engines to drive Kenya’s economy.

“Insurers will also be looking up to opportunities provided by recent discovery of Oil and Gas across the East African region to widen their market share and increase profitability of the industry,” said Mr. Mutiga.

The report talks of a brighter future for the industry due to reduced political risk following a peaceful election and transition and plans to launch a Common Market, which point to a solid economic future for the region in the medium to long term.

The report talks of a brighter future for the industry due to reduced political risk following a peaceful election and transition and plans to launch a Common Market, which point to a solid economic future for the region in the medium to long term.

Highlights in these sectors include multi-billion projects like the Lamu Port, South Sudan Ethiopia Transport corridor (LAPPSET) meant to open up the oil rich northern Kenya, the Standard Gauge Railway (SGR) project, in addition to the Government’s planned development of 300,000 housing units in the next three years through Public Private Partnerships.

The industry is also expected to access low income earners through micro-insurance products and diversifying distribution methods to further increase the penetration and grow gross written premiums.

“Micro insurance and bancassurance are still in the early stage of development and they will be key drivers of both premium growth and penetration,” he said.

In addition, the sector is expected to be a beneficiary of the National Social Security Fund (NSSF) Act 2013, which allows employees to opt out of the scheme. The withdrawal is expected to spur growth of the pension business to the advantage of the insurance sector.

During the period under review, the industry incurred net claims totaling KES. 63.35bn in 2013 compared to KES56.03bn in 2012, representing an increase of 13.1pc. The sector recorded gross written premium of KES 130.65bn in 2013 compared to KES 108.54bn in 2012, representing an increase of 20.40pc.

Overall, gross earned premium increased by 16.36pc to stand at KES 107.18bn in 2013 compared to KES 92.11bn in 2012. General insurance recorded gross premium worth KES 86.64bn compared to KES 71.46bn in 2012, representing 21.1pc growth.

Medical insurance recorded the highest growth in gross premiums of 59.3pc to KES 21bn up from KES 13bn in 2012 as results for two newly licensed medical insurance underwriters

Life Insurance on the other hand recorded a premium income of KES 44.01bn in 2013 compared to KES 37.08bn in 2012, representing a growth of 18.7pc.

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