Kenyan insurers are set to witness stronger revenue and deeper penetration, thanks to an expanding middle class and young population.
A report on sub-Saharan markets done by professional services firm EY forecasts that Kenya’s insurance sector could expand by a 6 per cent compound annual growth rate in premiums through to 2018.
It also expects a regulatory overhaul to increase the pressure for the country’s insurers to consolidate.
Currently, Kenya’s insurance penetration rate stands at 2.9 per cent of GDP.
The life insurance segment, in particular, represents a significant growth opportunity. With an expanding middle class and rising life expectancy, demand for personal coverage is set to rise.
Along with rising household prosperity, Kenya’s relatively young median age, where roughly 70 per cent of the population is aged under 35, will support growth in the life insurance segment, according to Ezekiel Macharia Mburu, the chief actuary at Kenbright Actuarial and Financial Services.
According to Mr Mburu, younger Kenyans are likely to become more aware of the benefits of personal insurance, with a shift in culture awareness of life insurance products, especially as this cohort is more risk-oriented.
“The life insurance segment in Kenya is small, which is out of line with global trends, which suggests that it will grow,” Mburu said.
Though the life segment is seen as having the strongest growth potential in the market, as in many African economies, the industry is currently dominated by the non-life component.
According to data issued by the Insurance Regulatory Authority (IRA) in June, the life segment only accounted for 31.4 per cent of total written premiums valued at Sh55.27 billion in the first quarter of this year, with non-life representing the remainder.
The industry also saw a slowing of growth, with the value of written premiums expanding by 9.6 per cent during the first quarter of this year, compared to 16.4 per cent in the first quarter of last year.
The country is also in the final stages of a regulatory overhaul, including establishing a Financial Services Authority (FSA) to consolidate the fragmented insurance landscape.
The FSA will merge four regulators — the IRA, the Retirement Benefits Authority, the Capital Markets Authority and the Sacco Societies Regulatory Authority — under one umbrella to provide a more organised approach to the sector.