I think we’ve been here before!

I have looked back over my blogs and occasionally, they have some positive news and exciting developments at JWS or in the industry. Sadly, there are also many articles where I have been the bearer of bad news and as I have always said ‘please don’t shoot the messenger!’

In 2021, you may recall that insurance rates were being forced upwards as a result of pressure from reinsurers, those organisations that ultimately pay the large portion of your claims. Failure to comply with these rating changes would ultimately result in your insurance claims being at risk of not being paid. Since 2021, we have seen fire rates increase, an imposition of a 0.025% rate if you decide to cover earthquake, WIBA rates jumping, alongside motor, bonds and engineering. It’s not just businesses that have been affected, but individuals as well.

In other countries, the likes of the UK and USA, we have had major catastrophes such as terrorism attacks and severe floods, and in the USA, there have been cyclones, hurricanes and massive forest fires. What happens in these situations is that the insurers/reinsurers pay the claims, then look at the figures and probably say something along the lines of ’well that was an awful year, but look at the previous 5 years where we have made substantial profits’. That is insurance for you…you get ‘cycles’, and the insurance market generally recovers from it.

I am not here to criticise the local insurance market, on the contrary, it has had some tough times, and rates had to harden. Unfortunately, it seems that the terms and rates being enforced by reinsurers is not abating and it appears that, should the market have to pay claims under certain classes, they have this ‘knee jerk’ reaction by imposing more increases or threatening the covers that are required by our clients.

JWS has always tried to keep our clients abreast of rating and terms changes being imposed, and today we have just received the latest demands from reinsurers effective from 1st January 2025. Don’t forget, insurers have to comply with these changes, otherwise, any reinsurance arrangements they have are null and void, meaning the clients only redress for claims payment is against the insurer. As previously outlined, this may not be an issue for small claims, but large claims can only be met if the insurer in question has the funds available.

So, what are the changes being made. There are dozens of them, but I will provide you with the ‘headline’ ones, and those that will affect most of you, and I will put them into ‘laypersons’ terms.

  • There have been arguments as to whether the recent GenZ riots fall under standard riots covered under most fire policies, or whether they are deemed to be politically motivated. Some insurers have agreed to pay, some not, some under the peril of riot, some under the Political Violence and Terrorism (PV&T) policy. It is now set in stone and made very clear in the new exclusion. Basically, if you want to protect your assets from riots or civil commotion, you are well advised to buy PV&T cover.
  • Marine Cargo insurance now has its own tariff, and new rates have been introduced. These will be imposed from 1st January and, as there is strict enforcement of non- externalisation of insurance out of the Kenyan market, you may see your marine premiums rise.
  • In view of the bad floods this year and clients ‘daring’ to claim for flood damage (!) the market is out for revenge! Like Earthquake cover, as from 1st January, you will be charged a separate rate of 0.025%, with no discount. So, for every KES 10m of cover, you will pay an extra KES 2,500.

They haven’t finished there though. In addition to charging you for flood cover, these are some of the additional penalties:

  • There is no cover if you are within 10 metres from a water body
  • Your excess (the amount you must contribute is now a minimum of 10% of the loss amount, with minimum amounts depending on your sum insured
  • Under Consequential Loss, your first 15 days of costs will not be covered
  • Lastly, if you are thinking of claiming more than once, your second flood claim will be settled at 75%, third loss at 50% and after that, no claim will be paid. Only after 10 years claims free, will an Insurer then consider reinstating the cover!
  • One bit of good news, to warm your hearts…if you want ‘spontaneous combustion’ cover separately, the rate has come down by 50%, so time to celebrate 😊

Now, we sincerely hope that local insurers will fight against these unfair changes, but frankly, why should they. There is more premium in the pot for them and their risk is reduced, so for them, it’s a ‘win-win’. Rest assured, we are making representations to our insurer partners, but I think we are a lone voice, and I am not sure if we will be listened to.

So, all I can say, on behalf of the industry, is ‘sorry’ ☹

If you have any questions on the above, please do get in touch: Email:talk2us@jwseagon.com  or Tel: + 254 (0) 709 455 000.