•IRA data shows insurers invested Sh354.88 billion in government bonds and Treasury bills in the year to September
•This while only 6.5 per cent (Sh37.51 billion) went into investment in the stock market
Insurance firms seem to be ditching the Nairobi Securities Exchange and refocusing their investments into government securities.
More than half of investment generating assets in the insurance industry went into government securities as underwriters sought to remain profitable in a tough economic environment.
Nine month data by the Insurance Regulatory Commission shows insurers invested Sh354.88 billion in government bonds and Treasury bills.
This was the highest proportion asset class at 61.5 per cent of the total Sh577.04 billion worth of investments, while only 6.5 per cent (Sh37.51 billion) went into investment in the stock market.
“Investments in income generating assets grew by 13 per cent from Sh510.44 billion reported at the end of the third quarter of 2018 to Sh577.04 billion a year later,” the report stated.
Other asset classes with high proportions of investments were property at Sh83.61 billion (14.5 per cent) and Sh54.81 billion (9.5 per cent) that went into term deposits- an interest-bearing bank deposit with a specified period of maturity.
In 2018 underwriters took a major hit from a bear run at the NSE which impacted their end of year results negatively.
Last year’s poor performance of top counters at the NSE took its toll on insurance and investment firms.
The equities market was on a downward trend with the All Share Index NASI down 18 per cent, the NSE 25 was down 17.1 per cent and the benchmark NSE 20 dropped by 23 per cent, a bear run on the bourse that wiped out Sh419 billion in 2018.
This saw Britam, a financial services firm which invests heavily at the Nairobi Bourse issue a profit warning for the year ending December 31.
The firm attributed Sh2.2 billion losses to poor performance of the stock market, which led to reduced returns from equity investments and tough operating environment during the year.
Other firms that suffered the same fate include Sanlam Kenya’s which was forced to write off Sh574 million in ARM Cement after the cement maker was put under administration.
The insurance industry’s gross written premiums grew 6.5 per cent to Sh174.92 billion as at the end of September, only a fraction of what went into the alternative investment portfolio.
“General insurance business remained the largest contributor to industry insurance activity contributing 60.2 per cent of the total premium. Motor insurance and medical insurance classes of business account for 66.5 per cent of the gross premium income under the general insurance business,” the report stated.
While the long term insurance and general insurance segments grew by 11 per cent and 3.7 per cent respectively, the general insurance business segment reported a loss of Sh2.66 billion, down from Sh2.8 billion the same period last year.