The widespread flooding in Kenya in March and April has left insurance companies struggling to settle Sh3.1 billion in claims as the effects of climate change become the top risk for insurers.
The latest data from the Insurance Regulatory Authority (IRA) shows that insurers have settled Sh147.3 million or less than 5.0 per cent of claims for damaged farms, houses, industries and office blocks.
Torrential rains and floods that began in March have killed at least 330 people and displaced hundreds of thousands, according to government statistics.
The rains also damaged farms, homes, roads and bridges across the country, raising concerns about the impact on the second quarter’s economic performance.
“In 2024, Kenya faces major floods due to heavy rains, causing significant damage and loss of life. As a result, insurance companies are experiencing an increase in claims for damages and losses caused by floods,” notes the IRA.
Authorities noted that by the end of April, insurance companies had received more than 850 claims worth Sh3.145 billion following the 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 floods in March and April, mainly affecting settlements on riparian lands, and industries in the Nairobi Industrial Area and 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.
The insurance company reportedly received five claims worth Sh58.9 million in Meru and three claims worth Sh74 million in West Pokot. Claims from all other counties total 118 and are worth Sh169.6 million.
“Out of 47 counties, 19 counties (40.4 percent) reported flood-related claims to public insurance companies. The top five counties that reported flood-related claims were Nairobi, West Pokot, Nakuru, Kiambu and Meru,” said the IRA.
Industry executives expressed concern about the fight to keep up with the effects of climate change, which has led to natural disasters such as floods.
The surge in extreme weather events has created a property insurance crisis in some parts of the world.
IRA data shows the extent of the damage caused by floods witnessed in the country for several weeks around March and April, where loss of life and damage to property worth billions of shillings was reported.
“We share these concerns and worry that growth will slow in Q2:24 (second quarter of 2024) due to the destruction and disruption caused by the heavy rains,” Christopher Legilisho, an economist at Stanbic Bank, said earlier.
While the claims are overwhelming to insurance companies, IRA data shows that claims settlements remained low at the end of April, with only Sh147.3 million claims paid out.
GA Insurance received the highest amount of 145 claims valued at Sh988.1 million, but has settled only one claim valued at Sh327,280.
Tausi Assurance Company has also received 87 claims worth Sh374.4 million, but settled only one worth Sh20 million at the end of April.
Rounding out the list of top five insurance companies that received flood-related claims are Intra Africa Assurance Company, 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 . valued at Sh80.2 million.
First Assurance and Intra Africa Assurance, however, did not settle the claim at the end of April, when ICEA Lion paid six 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 noted that the most claims came from the Industrial Fire business class where 285 claims were valued at Sh1.8 billion, followed by the Domestic Fire class with 210 claims valued at Sh169.2 million and private motor vehicles with 178 claims valued at Sh83 million. 2 million.
Flood-related insurance claims are set to destroy business for insurers in the country, which continue to record losses in their core business – selling policies.
IRA data shows that since 2019, the company has not made any underwriting profit – that is, the profit from insuring the business that is the core business of its existence – but instead relies on other investments to earn money.
