After a 10 month absence, I am delighted to be back in Kenya. Covid-19, lockdowns, and a passing of a loved one, all contributed to my enforced and lengthy absence, but I was always going to return and here I am! So far, it has been a joy to be back – more freedom, seeing so many friendly faces and, of course, the beautiful weather.

Sadly, I come back to an insurance market that is imposing substantial premium increases, first reported in my article of 15^th December.

A reminder of the issue:

Due to continued losses and poor results, local and international reinsurers are forcing local insurance companies to increase their premiums to new minimums.

What is the current situation?

Fundamentally, there is very little that the market can do to get round these hikes in rates and premiums… failure to comply will result in their being no valid reinsurance, and therefore your chosen Insurer will be left to settle the total claim themselves.

Example:

A well-known, reputable, and trustworthy Insurer has a balance sheet with Total Assets of KES 7bn and you, as the Policyholder have a major Fire, with a total loss of KES 500m. One would assume that you are safe, and that Insurer has enough assets to pay the claim. However, when you look closely at the Insurers accounts, the total assets are made up of property, equipment, investments in other businesses etc, and actually they only have around KES 100m in liquid cash. In effect, whilst a little more complex in reality, the Insurer has a deficit and has to find the other KES 400m to settle the loss. If they have breached the rules on minimum rates it means that the reinsurance is invalid, so the local insurer will have to pay your total claim and you may have a long wait for your payment!

What does this mean for you?

From what I have seen and heard so far anyone with Fire, Engineering or Bonds insurance will almost certainly see a rise in their premiums. Insurers and brokers are looking at ways to counter this with 3-year agreements, claims experience discounts, and offsetting these increases by discounting other types of policies, but the net result will see increases. Bad timing is an understatement!

What are we doing at JW Seagon?

At JWS, we reacted to this at a very early stage and have plans afoot to manage the situation as best we can. We are in close contact with our main partners and some additional Insurer’s and are actively looking for alternative solutions.  Then, well in advance of the next renewal we will carry out a market exercise on all our clients and then present to them the various options, including new insurers who are not on our existing scheme portfolio. We can assure you, we are doing all that we can to make this as painless as possible for you!

If you have any questions you would like to raise at this stage, please do not hesitate to ask your Client Relationship Manager or simply contact us at [email protected]. In the meantime, thanks for welcoming me back, and please don’t shoot the messenger!!