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Kenya Insurance Report Q2 2011
Business Monitor International, Feb 2011, Pages: 46
The Kenya Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kenya's insurance industry.
Political problems and a tricky economic climate have not stopped the insurance industry from flourishing in Kenya. The life and non-life subsectors have steadily and strongly grown and we expect this to continue. However, this has not meant consistent profitability across all the companies involved or all business lines. In particular, many of the non-life companies providing health insurance have failed to make a profit from this line.
The life sector has continued to develop and its premiums account for about a third of the total. Kenyan institutions are gathering long-term savings from domestic investors, which is very different from Nigeria and even from much richer and more stable countries in the Middle East. This is encouraging, not least because the sector is made up of local firms apart from than Pan Africa, the largest player in the segment with a market share of around 20%, which has a strategic alliance with a subsidiary of South Africa’s Sanlam.
The sector is fragmented, with the three largest non-life companies, Jubilee, APA and Kenindia, accounting for about a quarter of total premiums written in the segment. APA is the consolidation of Apollo with Pan Africa’s non-life operations. There is plenty of scope for much more consolidation. Some foreign insurers do operate in Kenya. South African’s Old Mutual has a small life operation in Kenya and four major Indian insurers - New India Assurance, Oriental Insurance, United India Insurance and Life Insurance Corporation of India - are minority shareholders in Kenindia.
Compared to multinational insurance companies from developed countries these firms have a high tolerance of emerging market risks and low exposure to the volatility of capital markets in the wake of the global financial crisis.
The industry faces some significant challenges, one of which is the lack of knowledge about insurance. Companies have to deal with a lack of consumer understanding, the lack of incentives to employers, the domination of the market by brokers and cut-throat price competition.
We estimate total premiums in 2010 of KES72,641mn. This includes non-life premiums of KES47,051mn and life premiums of KES25,590mn. In 2015, the corresponding figures are forecast to be KES139,968mn, KES99,531mn and KES40,438mn respectively. In terms of the key drivers that underpin our forecasts, we expect non-life penetration to rise from 1.60% in 2010 to 1.85% in 2015, and for life density to rise from US$8 per capita to US$13 over the same period. BMI’s proprietary Insurance Business Environment Rating for Kenya is 36.8.
Issues To Watch Product Development And Pricing
Traditionally, the products produced by Kenyan insurers have often been suboptimal, undifferentiated and have competed on price alone. To improve profitability this needs to change.
Actions Of The Regulation Authority In May 2007, regulatory responsibility for the insurance sector was transferred to the Insurance Regulatory Authority (IRA). In 2008, the authority published a corporate plan that showed that it has a clear understanding of the problems facing the industry. It continues to be a potential driving force in the development of the new insurance act and its actions will dictate how much the industry’s problems and challenges are likely to be overcome.
Further Industry Consolidation Any consolidation is a favourable development, as would any move by the foreign groups that are already present in Kenya to increase their investments.
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