Insurance Update: Fire and Engineering rates are increasing!
In the past couple of weeks, we have received a communication from several separate insurers advising us that owing to continued losses and poor results, local Insurers are being forced to increase their Fire and Engineering rates to new minimums effective from 1st January 2021.
It is important to understand that, failure to comply may leave you exposed. Insurers are being told to increase rates to these new limits and if they do not, their reinsurance will be null and void. If you require a copy of the circulars, we will be happy to send them to you.
Below is the new warranty applying to Kenya Insurers as from 1st January 2021:
What is Re-Insurance?
All Insurers have to carry reinsurance, which simply means that they initially take 100% of a risk, and then insure part of it with another insurer. For example, if you insured your property for KES 100m ($1m), then perhaps your local Insurer will retain 35% of the risk, the rest will be reinsured. The reason for doing this is that very few insurers have the capacity to take on 100% of all risks. As a result, insurers are reliant on this type of support throughout the World, and the smaller the insurer, the more they will arrange reinsurance.
In effect, if the Insurer does not have the support of a reinsurer, they will have to meet 100% of the claim themselves. This is fine with small claims, but when that ‘big one’ hits, there are very few local insurers who have the capital and capacity to settle these claims. As such, it is vital that your insurer has adequate reinsurance.
Why are we telling you?
As an experienced broker and one that always acts professionally and with our clients´ best interest, it is essential that you are aware of the facts, and the possible consequence if insurers do not comply with this instruction.
How does this affect you?
If your insurer does not comply with the new minimum rates after 1st January 2021, your claim will have to be met entirely by your local insurer. If this were to happen, you would need to check the sums insured and ask for the insurers balance sheet to ensure they can meet their obligations.
This means that you will likely be facing increases in premiums on Fire & Engineering insurance. For JW Seagon clients and anyone who wants to know what alternatives there are, JW Seagon has options for you, ensuring you are fully protected and with the best financial security available. Please contact us to discuss this further.
If your Insurer has undercut the minimum rates, we strongly advise you to ask your insurer/broker to request a confirmation from the reinsurer, that they have approved the lower rates.
If you have any questions on any of the above or would like us to review your current policy free of charge then please do not hesitate to get in touch on [email protected] or +254 (0) 709 455026.