The insurance industry recorded a steep drop in profitability in the second quarter of 2025, weighed down by a Sh17 billion jump in claims that outpaced revenue growth.
Industry net profit fell to Sh12.8 billion from Sh16.7 billion posted during the same period last year, according to new data from the Insurance Regulatory Authority (IRA).
The report shows that total claims and policyholder benefits across general, long-term, and micro-insurance surged 16 per cent to Sh123 billion, up from Sh106 billion in Q2 2024.
This increase wiped out much of the benefit from rising premium collections, which grew 13.4 per cent to Sh241.3 billion compared to Sh212.8 billion a year earlier.
The general insurance segment carried the heaviest burden, with claims rising to Sh55.1 billion from Sh51.8 billion. “General Insurance Business remained the largest contributor to industry insurance premium, 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,” IRA stated.
Medical insurance remained the single largest driver of claims, accounting for 49.4 per cent. Motor commercial and motor private followed closely at 20.4 per cent and 20.2 per cent respectively.
Together, the two motor categories generated more than 40 per cent of claims despite contributing only a quarter of premium income, underscoring the persistent underwriting losses in the segment.
Medical-related payouts jumped 16.9 per cent to Sh27.2 billion.
The IRA noted that this reflected higher healthcare costs and increased usage of health covers as the government pushed for broader adoption of the Social Health Authority.
The loss ratio in this class rose to 81 per cent, well above the industry average of 73 per cent, highlighting the pressure on insurers’ margins.
The long-term insurance business was also under strain, with claims and policyholder benefits increasing 34.6 per cent to Sh67.6 billion from Sh50.2 billion. This rise was linked mainly to higher payouts on life policies and group life covers.
On the revenue side, the industry recorded strong growth as more Kenyans took up insurance. Net premiums expanded by 21.9 per cent to Sh196.8 billion, while investment income grew 24.2 per cent to Sh77 billion, supported by healthy returns from government securities that dominate industry portfolios.
However, mounting obligations outweighed the positive performance.
Management expenses increased 15.3 per cent to Sh32.9 billion, while commissions paid to intermediaries surged 50.4 per cent to Sh11.7 billion.
The combined impact pushed profit before tax down 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,” IRA said in the report.
Reinsurers also faced challenges. Their overall profit after tax stood at Sh2 billion, reflecting only a modest recovery.
In the general reinsurance segment, incurred claims eased slightly to Sh7.3 billion, but net premium income dropped 6.8 per cent to Sh14.5 billion. Operating profit for general reinsurers declined by 8.3 per cent to Sh3.06 billion.