NAIROBI, Kenya, Jun 5 – The Kenya Reinsurance Corporation is staring at a revenue drop of at least Sh1 billion, an equivalent of five percent of its total earnings this year occasioned by lost contracts related to the COVID-19 pandemic.
The company’s Managing Director Jadia Mwarania said the lion’s share of the impact will be as a result of increased claims and rebates on premiums as businesses globally seek to re-negotiate their contract terms with underwriters and re-insurers.
Mwarania added that the five percent 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. On our end, we estimate the industry growth to shrink by at least 2 to 3 per cent” Mwirania said in an interview.
This year, Kenya Re had projected an income of over Sh19 Billion based re- insurance premiums, property, investment income and business diversification.
The MD added that the corporation has started to aggressively collect 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”, said Mwirania.
To cushion the corporation on the investment side, the MD said the focus for the next half of the year will be to increase dollar reserves in order to accumulate hard currency 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.
While cautiously noting that pandemics like COVID-19 are not covered in insurance contracts, Mwirania said that it will be the responsibility of each party to come up with the right solution to cushion both the client and insurer based on negotiation.
“We are well aware of the circumstances that have been occasioned by the pandemic. Most of the claim settlements will be based on negotiation and evaluation the best case scenario for each contract with mutual agreements between the involved parties” he said.