Established through an Act of Parliament in December 1970, Kenya Reinsurance Corporation Limited (Kenya Re) commenced business in January 1971 as a pioneer Reinsurer in Eastern and Central Africa. Over the years, Kenya Re has progressively and consistently provided unrivalled reinsurance services to more than 265 companies spread out in over 62 countries in Africa, the Middle East and Asia. As the corporation celebrates 50 years in the industry, Corporate Watch magazine’s Ker Mogallo had a sit down with the Managing Director, Mr. Jadiah Mwarania (OGW), to shed light on the present and the future prospects of Kenya Re.
Striving to live true to its mission, To be a global partner in provision of risk management solutions that secure the future and create value to its stakeholders, the Kenya Reinsurance Corporation Limited is committed to offering world class reinsurance services through innovation, integrity, professionalism, learning, good corporate citizenship, team work and objectivity in a bid to achieve seamless stability.
Speaking to Corporate Watch Magazine in an exclusive interview, Kenya Re Managing Director Mr. Jadiah Mwarania defined reinsurance as a risk transfer mechanism through which risks are transferred from an insured through an insurer to a reinsurer. This process he added, involves all the aspects of pooling of risks, accumulating them in one pot which is then transferred to an insurance company and eventually transferred to a reinsurance company for a fraction of the price paid by the insured referred to as premium.
Usually, in the arrangement, he added, the reinsurer takes on all or part of the risk covered under a policy issued by an insurance company in consideration of a premium payment whose coverage would be too great of a burden for a single insurance company to handle alone. In other words, it is a form of insurance cover for insurance companies.
Successful Tenure…
This being his eleventh year at the helm of the organization, Mr. Mwarania who is a Board Member of the Insurance Training and Education Trust (ITET) Board and member of the Finance and Development Board Committee of the College of Insurance of Kenya, boasts of a successful tenure with many milestones achieved under his watch.
“We have made great strides as a Corporation and these can be traced through the corporation’s strategies. Financial performance has been one of our main pillars as we have grown premiums up to Kshs. 18.5 billion in the year 2020.
In 2019, we managed Kshs. 17.5 billion which signifies growth. We have also grown our share price as well as the investment income to Kshs. 3.7 billion in the year 2020 and managed to penetrate markets across Africa, middle East and Asia. Further, we are able as a Corporation to react to market demands such as the recent demand for products related to the COVID-19 pandemic,” said the Kenya Re MD who holds Bachelor of Commerce (B.com.) (Hons.) and Master of Business Administration (MBA) degrees from The University of Nairobi.
He added that before the pandemic, the Corporation had innovatively responded to market demands by launching products in the ‘political risk’ segment as well as other upcoming segments on a need to need basis.
In terms of the business process, which is another key pillar of the business, the Corporation has been able to put in place technology based infrastructure to address customer needs. The infrastructure include software to tackle business management processes such as underwriting, ERP, HR, Financial Management, procurement as well as internal audits.
“In the implementation of the above, we have had to intensely train our staff to expose them to the best international experience. We have embraced the best management culture and practices as espoused in ISO standards. Further, we established regional offices in Cote d’ivoire in 2010, Lusaka Zambia in 2015 and Uganda in 2019. We have been able to address customer needs especially claims payments across these ten years.” noted Mr. Mwarania who is also a Fellow of the Chartered Insurance Institute of London (FCII) and the Insurance Institute of Kenya (FIIK).
The Corporation, he says, also set up the Retakaful window back in the year 2012 which today writes up to Kshs. 1.2 billion in terms of premiums. It is also ISO certified by the standards 9001:2015 which is a quality management system and by 27001:2013 which is an information security systems ISO certification.
Under his stewardship, the Corporation was rated B (fair) by an International Rating Agency, A.M Best. The Corporation was rated AA by Global Credit Rating (GCR) and has successfully maintained this rating to date.
The Corporation has a very well diversified investment portfolio across all its investment mediums in Kenya and has embraced all possible aspects of governance from the board level through management to the bottom levels. The organizational structures, especially policies have in particular contributed to the immense success of the Corporation.
Encounters…
Despite the achievements, competition continues to be a big challenge especially due to the problem of undercutting where insurance companies are charging uneconomical prices and where premium volumes are lower than they should be, causing a fall in income. This causes a shortfall in resources for investment purposes.
There is also low penetration of insurance across Africa which is a big hinderance to the growth of the insurance industry. There are also regulatory challenges as well as the Covid-19 which has come with increased claim levels especially for motor and medical.
With the prevailing circumstances, premium volumes have fallen in certain lines of business such as travel and hospitality. The industry is also facing challenges with debt collection as most premium payers have been laid off or have been subjected to pay cuts thus they are unable to service the premiums hence affecting the volume of premiums.
“As a Corporation, we have been able to tackle competition through lobbying via the Association of Kenya Insurers for positive developments in the market like cash and carry. We expect this to work like in the first world markets where when you get insured premiums are paid right away.
These lobbying efforts are paying off. We are also lobbying for a levelled playing field in terms of pricing to curb bleeding of the insurance premiums. For Covid-19, we continue to take measures as directed by government. Over and above, we as a Corporation have initiated policies such as provision of masks to staff, sanitizing the work areas, encouraged vaccinations as well as medical cover for staff that covers inpatient, outpatient as well as Covid-19 care.” the MD said.
Strategic Plan…
The Corporation’s business Continuity Plan in place has enabled adjustments to the disruptions occasioned by the pandemic to allow staff to work away from the office. The Corporation’s robust Virtual Private Network (VPN) connectivity allows staff to connect from anywhere and access all systems and resources they would normally access while in office. The Corporation is optimally utilizing use of digital communication platforms including Microsoft Teams, Webex, WhatsApp messaging, emails and telephone calls to frequently keep in touch with the brokers and hence enhancing visibility.
Historically, presently, and even in the future, Kenya Re has been instrumental in the national economic development.
The Corporation built residential houses in Mombasa, Kisumu, Eldoret, Meru and Nairobi which were sold to Kenyans through mortgage financing. In the process, it employed many people thus contributing to socioeconomic development. Kenya Re has also developed four commercial buildings that offer office accommodation.
“One of our mandates is to train on matters insurance and reinsurance in Kenya. Literally, every insurance company in Kenya either has a staff that was trained by Kenya Re or worked at Kenya Re. As of today, we continue to provide reinsurance as a service.
We believe we continue to give peace of mind to insurance companies and the insured as we undertake our mandate. We continue to invest with the profits we make in Kenya and we are one of the biggest tax payers. We also pay dividends and believe through this we are empowering the Kenya Re investors.” noted Mr. Mwarania a Chartered Insurer (CI) of the Insurance Institute of London, the highest and the most prestigious level of professional achievement with the Institute.
He added that Kenya Re has been on the forefront advocating for insurance penetration in Kenya, in the continent and beyond. This he says will further strengthen the Corporation and enable it employ more Kenyans.
“We continue to partner with insurance companies to innovate products, develop, reinsure and market them. With proper strategies, the insurance and reinsurance segment is bound to grow because the global economy is growing and will definitely take the insurance sector with it. We must craft strategies to tap into opportunities and be able to use the correct tool which in my view is technology.
Through technology, we will be able to identify consumer needs and be able to drive product delivery based on the need especially the young demographic who want to buy their services and even products online.
Those who are unable to keep up will be left behind, thus they have no choice but to embrace technology,” added Mr. Mwarania who also sits on the Industrial Development Bank (IDB) Board.
Even in embracing technology, the MD notes that cyber security poses a great challenge to the industry and advises that precautions must be taken in order to curb insurance fraud. He also notes that consumers are getting more sophisticated thus innovations must be up to date through research, being dynamic and addressing the changing market needs.
Business environment in the wake of a pandemic…
Over and above reinsurance, Kenya Re has initiated a number of Corporate Social Responsibility (CSR) initiatives in response to the Covid-19 pandemic to cushion Kenyans. Among the measures taken by the reinsurer include the restructuring of products to meet the current market needs. Kenya Re has also been accommodative of the regulator’s request to go slow in terms of collection of premiums past due dates. The Corporation has also shelved its rent escalation clause for its tenants especially the SME’s in its premises.
The Corporation has reviewed downwards rent for its tenants in response to many businesses suffering the covid-19 ‘heat’. It is also considering waiving the need for a deposit on entry for rental spaces especially the governmental ones. Last year, Kenya Re contributed Ksh 40 Million to the government towards the Covid-19 response fund, going along way in alleviating the suffering of Kenyans. Kenya Re has also partnered with schools to improve infrastructure especially for students with disability to ease movement and aid delivery of education to the students.
The Corporation in its quest to swiftly serve the masses, is employing a five- year strategy to ensure customer needs and market trends are well covered.
The strategy also focuses on prompt payment of claims to ensure the Corporation retains satisfied clients for purposes of future business through loyalty and customer retention.
Kenya Re also continues to diversify its investments to try and create stability regionally to boost profitability that will fund expansion and stakeholders’ interests in addition to the ability to absorb catastrophe should they appear in the future.
“Any business which has aspirations of standing strong into the future must be solid in terms of strategic planning. Embracing technology today is really not an option, it is a must. The various rapid technological changes are challenges that every business has to struggle with to remain relevant and serve customer needs because without that then the sustainability of the business is compromised. We therefore must take the challenge and be able to address emerging issues and cope with the current situations as well as the future as the world becomes more and more sophisticated.” concludes the MD.