In April, Kenya skilled the worst floods in a long time after heavy rainfall in most components of Kenya.
As that was occurring, the weatherman warned of a looming cyclone alongside the East African shoreline. Tropical storm Lyla, then hit the shoreline just a few days later killing two and destroying infrastructure.
Whereas the fast bodily injury was evident, the ripple results shall be felt later and for an extended time. One in every of them is the rise in insurance coverage premiums (quantities paid to insurance coverage corporations for canopy towards dangers corresponding to loss or injury of property like vehicles and property).
Insurance coverage works on the precept of threat evaluation. Premiums are calculated based mostly on the probability of dangers occurring and the potential value of loss or injury.
With the consequences of worldwide warming, research counsel that excessive climate together with floods, storms, and cyclones will grow to be extra frequent and extreme. Because of this, insurance coverage claims will enhance in each frequency and potential claims.
After the floods in Kenya, insurance coverage corporations now face claims for broken companies and buildings. Additionally they should cope with claims from motorized vehicle homeowners.
These excessive climate instances will solely worsen. Noting this, Insurance coverage corporations must regulate their pricing fashions. The consequence shall be a big rise in insurance coverage premiums for insurance policies masking automobiles, properties, and companies.
For a lot of Kenyans, insurance coverage prices are already extremely prohibitive. But, automobile homeowners, already grappling with the financial challenges caused by the worldwide financial shocks, now face greater premiums to insure their automobiles.
The impression of the rising premiums extends past particular person policyholders. The insurance coverage sector as a complete is experiencing stunted progress. In keeping with the Affiliation of Kenya Insurers (AKI), insurance coverage penetration is just 2.33 per cent of GDP. It was 2.31 per cent 5 years in the past.
Increased premiums deter new clients from buying insurance coverage insurance policies, whereas current clients could select to cut back protection or drop their insurance policies altogether. This shrinking buyer base limits the potential for progress within the trade.
To handle the consequences of local weather change on insurance coverage premiums, it’s important to put money into flood mitigation infrastructure, corresponding to improved drainage programs and flood limitations. Extra drastic measures like highway closures on the recommendation of the Meteorological Division needs to be thought of. Moreover, the federal government may contemplate establishing a nationwide catastrophe insurance coverage fund to subsidise premiums for high-risk areas, making insurance coverage extra reasonably priced and accessible.
The author is a licensed member of the Institute of Danger Administration, (IRM) East Africa Chapter
