Kenya-Re projects a Ksh.1 billion revenue hit from Covid-19 pandemic

Regional based re-insurer Kenya-Re has projected a Ksh.1 billion revenue hit from increased claims and rebates on premiums as businesses globally seek to negotiate their contracts with underwriters and re-insurers.

According to Kenya Re Managing Director  Mr. Jadiah Mwarania, the five per cent hit will be ‘the worst case scenario’ for the corporation in the wake of anticipated business losses occasioned by the pandemic.

“At the moment, we have over 265 re-insurance contracts spread across over 70 countries in diverse segments such as medical, trade credit, lawyers’ liability fees among others. We expect the business to shrink in tandem with the lower GDP growth as projected by the government at the rate of 2.6 percent this year,” he said.

“On our end, we estimate the industry growth to shrink by at least 2 to 3 per cent.”

The hit on the re-insurer is expected to reverberate across the industry with primary insurance firms too facing a hit from higher claims and lost premiums from affected customers.

To mitigate the risks to revenue, Kenya-Re says it is aggressively collecting premiums from underwriters and brokers from the existing contracts to plug the gap.

“We are generating weekly reports to monitor targets and performance. At the same time, we have enhanced turn-around times for claim processing to a maximum of 48 hours,” added Mwarania.

Further, the firm says it will shore up its dollar reserves in anticipation of foreign contract claims.

Other measures being implemented include investing in fixed income instruments such as treasury bills, bonds and fixed deposits to mitigate the effects of volatility.

Kenya-Re will however find footing in its recent financial performance having posted a 74 percent increase in earnings to Ksh.4 billion last year.

The performance was backed by an 18.2 percent rise in gross premiums written to Ksh.17.5 billion from Ksh.14.8 billion in 2018.

Net claims and benefits in the period were however on the increase, rising by 20 percent to Ksh.11.4 billion.

The firm further increased its available cash and cash equivalents at the end of the period to Ksh.7.4 billion from Ksh.5.8 billion.