Insurers invest Sh66bn more in bonds, T-bills

 

The National Treasury building in Nairobi. PHOTO | SALATON NJAU | NMG

Insurance companies increased their investment in government bonds and T-bills by Sh66.2 billion or 15 percent in the quarter ended December, seeking to lock in double-digit returns offered by the securities.

Data from the Insurance Regulatory Authority (IRA) shows that the companies, including primary insurers and reinsurers, raised their investment in the assets to Sh506.6 billion in the review period from Sh440.3 billion a year earlier.

Investment in the risk-free assets grew by the largest margin, outpacing others including listed equities. T-bills and bonds have interest rates ranging from 7.2 percent to highs of 14 percent depending on duration, with long-term papers having the highest returns.

Most of the big insurance firms have been increasing their allocations to assets offering stable returns such as government securities and real estate, maintaining or reducing their exposure to the stock market which has volatile returns.

Life insurers were the biggest investors in government securities, raising their holdings to Sh400 billion from Sh348.55 billion.

“Kenya government securities (treasury bills and bonds) maintained their attractiveness to long term insurers comprising 76.4 percent (Sh400.38 billion) of the total long term insurers’ investments,” said IRA in the report.

General insurers were second with Sh78.7 billion in the review period, an increase from Sh67.34 billion the year before.

“Kenya government securities (treasury bills and bonds) and investment property accounted for the highest proportions of total general insurers’ investments at 54.7 percent and 17.7 percent respectively,” the insurance regulator said.

General reinsurance firms raised their investment in treasuries 16 percent to Sh20.9 billion, a move that saw the assets account for 43.3 percent of their overall portfolio.

Life or long-term reinsurers raised their investment in treasuries by 3.1 percent to Sh6.6 billion, coming second after fixed bank deposits which increased 17 percent to Sh6.3 billion.

“The long-term reinsurers invested more in government securities accounting for 44.3 percent of the total investment, followed by bank deposits at 42.3 percent,” IRA said.

Investment in government securities is an attractive option to insurance companies in Kenya as they are considered risk-free besides offering significant and stable returns.

The assets also offer liquidity by being tradeable in the secondary market and the short duration of T-bills.

emwenda@ke.nationmedia.com