The Kenya Reinsurance Corporation (Kenya-RE) has reported a revenue drop of at least Sh1 billion about five per cent of its total earnings this year due to the ongoing Coronavirus 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 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 and many others. We expect the business to shrink further with the lower GDP growth as projected by the government at the rate of 2.6 per cent this year. On our end, we estimate the industry growth to shrink by at least 2 to 3 per cent” Mwirania said
Before the pandemic struck, Kenya Re had projected an income of over Sh19 Billion based reinsurance premiums, property, investment income and business diversification.
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.
“We are also 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.
Other measures include investing in fixed income instruments such as treasury bills, bonds and fixed deposits to mitigate the effects the revenue drops. While cautiously noting that pandemics like COVID-19 are not covered in insurance contracts.
Mwirania also confirmed 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. The claim settlements will be based on negotiation and evaluation of the best-case scenario for each contract with mutual agreements between the involved parties”