Kenya Re has disclosed that insurance companies and brokers have failed to pay Sh 8.57 billion premiums, hurting the profitability of the insurance firm which has had to make provisions for the amounts receivable.
In its financial statement for the year ended 31st December 2021, the Nairobi exchange-listed firm said that the unremitted premiums had risen by Sh2.7 billion in the period, indicating that insurers are either struggling for funds or have become lax in their obligations to the reinsurer.
Kenya Re makes provisions for the unremitted premiums in its balance sheet, and when some of these impairments are realised, they impact negatively on its bottom line.
“Delays in receiving outstanding reinsurance premiums continue to pose credit risk to the group. This is mainly from outstanding retro recoveries as well as outstanding premium receivables from cedants and brokers. As at December 2021, gross receivables stood at Sh8.57 billion against provisions of Sh3.89 billion as compared to December 2020 where gross reinsurance receivables stood at Sh5.865 billion against provisions of Sh3.87 billion.” Kenya Re in their financial release.
Net profit in the firm rose marginally by 0.8 per cent to Sh2.97 billion, after incurring an impairment hit of Sh 909.4 million for bad debts relating to the unpaid premiums—up from Sh227.8 million in 2020.
Consequently, gross written premiums rose by 10 per cent to Sh20.36 billion from the Sh18.54 billion reported in 2020, while net claims incurred fell by 15.5 per cent from Sh13.5 billion to Sh11.4 billion.
The firm’s earnings from investments retreated by 3.4 per cent to Sh3.66 billion in the period, attributed to the effect of Covid-19 on the markets during the period.
Kenya Re itself enjoys mandatory cession of 20 per cent of all reinsurance business in the Kenyan market, practically guaranteeing it a steady flow of business and protecting its market share in an industry that is attracting more players on the continent.
Read also; Kenya Re’s Half-Year Profit Drops by 66% to KSh533.7 Million.
