2013-01-21 15:03:01 -
Kenya hosts the largest East African insurance market, although (re)insurers have faced significant challenges, including lower investment earnings, largely as a consequence of volatile equity markets and high inflation, according to a new report from A.M. Best Co.
In the report entitled, “Africa’s Diverse Insurance Markets Offer Growth Opportunities, Untapped Demand”, A.M. Best finds that total insurance penetration in the country reached 3.2%. In Kenya, insurers have rolled out some initiatives for microinsurance and Takaful.
The report also examines some of the challenges faced by insurers and reinsurers. Kenya’s insurance market is very competitive, in part as the main insurance buyers tend to be government-related bodies. These entities generally have to accept cover based on pricing as opposed to terms and conditions.
Insurers therefore face pressure on margins.
Carlos Wong-Fupuy, Senior Director, Analytics, said: “Recent significant challenges have included high political, economic and financial system risks, and the collection of premiums remains an issue for the market.
High realised and unrealised investment losses resulted from the significant decline in equity markets caused by the increase in interest rates. Insurers have also faced pressure on their capital positions owing to a volatile stock market. A.M. Best expects the industry to experience consolidation given these pressures.”
The report states that the Kenyan insurance market saw increasing competition from regional and international reinsurers in 2012. Foreign participation in Kenyan risks is mainly from regional financial groups—from Eastern and Southern Africa, or India—where there are cultural links. There is little visible foreign participation from large Western players. As is common with other emerging insurance markets, there are compulsory cessions for reinsurance risks in Kenya. A.M. Best expects compulsory cessions to be phased out in the coming years, although there is no clear timetable for the liberalisation of the market.
Yvette Essen, report author and Director of Industry Research, Europe & Emerging Markets, added: “The legal cessions in both the local and regional markets and the greater economies of scale enjoyed by the larger reinsurers limit reinsurers’ competitive positions and constrain their ability to increase market share.”
To access a complimentary copy of this report, please visit www3.ambest.com/bestweek/purchase.asp?record_code=208535
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A.M. Best Company, Inc.Carlos Wong-Fupuy, +(44) 20 7397
0287Senior Director, Analytics firstname.lastname@example.org
: mailto:email@example.com orYvette
Essen, +(44) 20 7397 0322Director, Industry ResearchEurope
& Emerging Markets firstname.lastname@example.org
: mailto:email@example.com orEdem
Kuenyehia, +(44) 20 7397 0280Associate Director, Market
Development & Communications firstname.lastname@example.org
: mailto:email@example.com orJim
Peavy, +(1) 908-439-2200, ext. 5644Assistant Vice
President, Public Relations firstname.lastname@example.org