Insurance sector profits slide as claims soar by Sh17 billion

Kenya’s insurance industry has faced a sharp decline in profits in the second quarter of 2025, largely driven by a surge in claims that outweighed growth in premiums. Net earnings fell to Sh12.8 billion from Sh16.7 billion in the same period last year, highlighting mounting pressure on insurers as policyholder payouts climb. According to the latest Insurance Regulatory Authority (IRA) report, total claims and policyholder benefits across general, long-term, and micro-insurance rose by 16 per cent to Sh123 billion, up from Sh106 billion in Q2 2024. At the same time, total premiums grew by 13.4 per cent to Sh241.3 billion from Sh212.8 billion, indicating that rising revenues were not enough to shield the bottom line. The general insurance segment was hit hardest, with claims increasing to Sh55.1 billion from Sh51.8 billion a year earlier. “General Insurance Business remained the largest contributor to industry insurance premiums, contributing 53.8 per cent of the total premium. Medical and Motor classes of business account for 67.6 per cent of the gross premium income under the general insurance business,” the IRA report notes. Medical insurance accounted for nearly half of all claims at 49.4 per cent, while motor commercial and motor private covered 20.4 per cent and 20.2 per cent, respectively. Despite contributing only about a quarter of premium revenue, the two motor categories generated more than 40 per cent of total claims, pointing to persistent losses in underwriting for these lines. Medical claims alone jumped 16.9 per cent to Sh27.2 billion, reflecting higher healthcare costs and greater use of health coverage as the government promotes the Social Health Authority. The loss ratio in this class reached 81 per cent, above the industry average of 73 per cent, creating further pressure on profit margins. Long-term insurance also experienced rising claims, which climbed 34.6 per cent to Sh67.6 billion from Sh50.2 billion. This increase was driven largely by higher payouts on life insurance and group life policies. While the industry continued to see strong revenue growth, net premiums rose 21.9 per cent to Sh196.8 billion, and investment income increased 24.2 per cent to Sh77 billion, supported by returns from government securities that dominate the sector’s portfolios. Yet, rising costs offset these gains. Management expenses went up 15.3 per cent to Sh32.9 billion, and commissions to intermediaries surged 50.4 per cent to Sh11.7 billion. Overall, profit before tax fell 30 per cent to Sh15.6 billion from Sh22.4 billion in Q2 2024. “The increase in gross premiums shows improving insurance uptake, but the claims environment is deteriorating faster than revenues are growing,” the IRA said.