Widespread flooding that hit Kenya in March and April left insurers struggling to meet claims worth Sh3.1 billion, as the effects of climate change became a major risk to insurers.
Latest data from the Insurance Regulatory Authority (IRA) indicates that insurance companies settled Sh147.3 million or less than 5.0 percent of claims related to affected farms, homes, industries and offices.
Heavy rains and floods that began in March killed at least 330 people and displaced hundreds of thousands, according to government statistics.
The rains also destroyed farms, homes, roads and bridges across the country, raising concerns about their impact on economic performance in the second quarter.
“In 2024, Kenya faced major floods due to heavy rainfall, resulting in massive damage and loss of life. As a result, insurance companies saw a significant rise in claims for flood damages and losses.
The authority notes that by the end of April, insurance companies had received over 850 claims worth Sh3.145 billion following massive floods that affected various parts of the country.
More than three-quarters (86 percent) of the claims were reported in Nairobi, which was one of the counties hardest hit by the flooding in March and April, which particularly affected settlements on riverside land, and industries in Nairobi's industrial zone. And the Athi River. .
IRA records show that a total of 673 claims worth Sh2.7 billion were reported by insurance companies in Nairobi, followed by Kiambu with 38 claims worth Sh64.9 million and Nakuru with 19 claims worth Sh65.5 million.
Insurers reported receiving five claims worth Sh58.9 million in Meru and three claims worth Sh74 million in Pokot West. Claims from all other counties totaled 118 and amounted to Sh169.6 million.
“Of 47 counties, 19 (40.4 percent) reported flood-related claims to general insurers. The IRA said the top five counties reporting the highest amount of flood-related claims were Nairobi, West Pokot, Nakuru, Kiambu and Meru.
Industry executives have expressed concerns about the battle to keep up with the effects of climate change, which is fueling natural disasters such as floods.
The increase in severe weather events has created a property insurance crisis in some parts of the world.
IRA data shows the extent of the flood damage the country experienced for several weeks in March and April, with loss of life and property damage worth billions of shillings reported.
“We share these concerns and are concerned that growth will slow in Q2:24 (Q2 2024) due to widespread destruction and disruptions caused by heavy rains,” Christopher Legilishu, an economist at Stanbic Bank, said earlier.
While claims have largely flowed to insurers, IRA data shows that claims settlements remained low by the end of April, with only Sh147.3 million of claims paid out.
GA Insurance received the largest number of claims with 145 claims worth Sh988.1 million, but settled only one claim worth Sh327,280.
Tausi Assurance also received 87 claims worth Sh374.4 million, but settled only one claim worth Sh20 million by the end of April.
Rounding out the list of the top five insurance companies that received the highest flood-related claims were Intra Africa Assurance, which received 44 claims worth Sh209 million, First Assurance Company Limited with 21 claims worth Sh60 million, and ICEA Lion General Insurance, which received 57 claims. Worth 80.2 million shillings.
However, First Assurance and Intra Africa Assurance had not settled any claims by the end of April, while ICEA Lion had paid six claims worth Sh2 million.
The law requires insurance claims to be settled within 90 days after the policyholder submits all documents related to the claim to the insurance company.
The IRA notes that most claims emanated from the industrial fire business category with 285 claims worth Sh1.8 billion, followed by the domestic fire category with 210 claims worth Sh169.2 million and private motor covers which reported 178 claims worth Sh83. 2 million.
Flood-related insurance claims are expected to worsen the business of insurers in the country, which continue to record losses in their core business – selling insurance policies.
IRA data shows that since 2019, companies have not made profits from underwriting — that is, profit from the insurance companies that are the core business of their existence — but have instead relied on other investments to make money.