CONTACTS: +254 726879488 (Mobile)
+254770 455 116 (Office)
By Steve Umidha
The economic damage from the Coronavirus outbreak has already been significant and it is likely to get worse for insurance players, experts have warned.
Uncertainty surrounding the deadly virus and its potential impacts on the insurance and reinsurance industry remains, with the sector expected to suffer in multiple ways – from employee and business continuity concerns to client service considerations to the financial outlook of insurance business as we know it.
While majority of local insurers and reinsurers do not cover pandemic risks, the Managing Director of Kenya Reinsurance Corporation Jadiah Mwarania has sounded a cautionary shot to industry players saying they should expect to see an upsurge in claims that are indirectly related to the pandemic.
“A reduction in gross written premiums is expected to be experienced across the industry. This will see overall bottom lines of insurers shrink this year,” he said, attributing the expected decline in underwriting business to employees working from home, a key factor that will affect the overall productivity of businesses.
“How long the pandemic will last and the full range of its impact is difficult to predict. What is certain, however, is that the downward trend will continue long after it is contained,” warned the underwriter.
An insurance claim is a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event. An insurance company validates a claim and, once approved, issues payment to the insured or an approved interested party on behalf of the indemnified.
Owing to the uncertainties brought by the pandemic, a good number of firms are likely to be hit directly, for instance if a premise is shut down by the authorities to contain the virus or indirectly where a hotel has seen its bookings slump due to client’s change of travel plans, insurance firms are likely not to dodge the hefty reimbursement pay-outs to the affected businesses to recover losses.
The pandemic has also provided a new headache for underwriters. As a result, claims costs will now be specific to the classes of business as insurer writes and their policy wordings to conform to policy.
However, the bigger picture concern for insurance companies will be how the outbreak might affect the economic environment, prospects for growth and profitability in insurers’ underwriting and investment portfolios.
As a result insurers are now urged to consider establishing cross-functional, emergency decision-making teams to coordinate the organization’s response, set new safety protocols, and assure quicker action as conditions continue to evolve.
The 2020 Economic Survey shows that total assets of reinsurance general business grew by 11.7 per cent in 2019 compared to an increase of 6.3 per cent in 2018.