Background

Introduction

This report presents an analysis of historical performance trends across the Motor Classes of business - January to March every year.
The analysis covers the period from January 2014 to March 2026.

Findings & Recommendations

Motor commercial

Earned premium has declined in Q1 over the past two years, but this is matched by a similar reduction in paid claims, indicating no adverse payment pattern.
Miscellaneous expenses remain stable and non-material (approximately KES 20 million), broadly consistent with prior year levels, indicating no cost pressure from this component.
Portfolio deterioration is driven by reserve strengthening, particularly increases in OCR and IBNR, rather than actual cash outflows, highlighting a shift toward reserve-driven earnings pressure. Q1 2026 recorded the largest reserve increase (KES 216M) among comparable periods, signalling heightened reserving pressure within the portfolio.
Past service claims are the primary driver of losses, meaning deterioration is coming from prior underwriting years with no matching premium, indicating legacy-driven profitability erosion.
The persistence of adverse experience despite the runoff of Watu Credit indicates the issue is systemic across the Motor Commercial portfolio, not isolated, pointing to a broader portfolio-wide structural issue.
Current service claims remain stable and consistent with prior years, suggesting no immediate underwriting deterioration in the current book.

Motor Private

There has been a significant reduction in earned premiums in Q1 2026, likely reflecting a slowdown in motor business during H2 2025, which has resulted in a lower earning base for the period.
Miscellaneous expenses remain stable and non-material (approximately KES 20 million), broadly consistent with prior year levels, indicating no cost pressure from this component.
The deterioration in results is primarily driven by strengthening of technical reserves (Outstanding Claims Reserves and IBNR) rather than increased claim payments, reflecting reserve-driven earnings volatility.
There is a slight increase in current service losses, which may be linked to catastrophic flood events experienced in early March, indicating a short-term event-driven impact on the portfolio.
More concerning is the emerging deterioration in past service experience, pointing to a structural weakening in legacy claims development.
Legal claims are becoming more pronounced within the Motor Private portfolio, indicating a potential shift in claims composition and escalation severity within historical claim cohorts, suggesting increasing litigation-driven risk pressure.

** Recommendation **

There is a need to implement targeted interventions to address the growing influence of legal claims across both Motor Commercial and Motor Private portfolios, combining risk-adequate pricing adjustments with enhanced claims cost containment and litigation management strategies.
Special focus should be placed on tracking the impact of recent catastrophic flood events, to assess whether observed current service increases are event-driven or indicative of emerging trend deterioration.

The Financial Perspective

Earned Premium Versus Claims Paid

The net position

The next graph shows the movement of funds from the Earned Premium position to Net Profit or Loss, accounting for key factors such as claim payments, service provider fees, intermediary commissions, miscellaneous expenses, overhead costs, and changes in outstanding claim reserves. This waterfall chart clearly illustrates how each factor impacts the journey from earned premiums to the bottom line.

Analysis of claims incurred

The next section evaluates the claims experience.

Claims Analysis

Observations

There were no theft losses recorded under Motor Commercial Own Damage, indicating full runoff of Watu Credit exposure within the OD segment.
There is a need to strengthen oversight on repair claims under Motor Commercial, as volumes have more than doubled compared to the same period last year, signalling rising frequency pressure.
The average cost of claim (excluding motorcycles) remains to be confirmed, and should be prioritised to assess severity trends. Under Motor Private, there is an increase in the number of repair cases, but this is offset by a reduction in average cost per claim, suggesting improved cost control or mix effects.
There is an uptake in Motor Commercial repairs through empanelled service providers (14%), requiring close monitoring to ensure value for money and avoid cost leakage.
Motor Private continues to lead in sourcing parts from empanelled providers (33%), indicating strong utilisation of negotiated supplier networks.
Service provider costs show mixed trends, with the legal team recording a reduction in spend while the OD team has seen an increase in overall spend, likely driven by higher claim volumes.
The average cost per assessor payout indicates that most assessors are adhering to the revised tariff structure, suggesting effective cost governance.
From a workload perspective, one OD claims officer processed KES 166M in claims in Q1 2026, representing a significant concentration risk and operational imbalance within the team.
There has been a modest improvement in settlement turnaround time for OD claims, reducing from 167 to 135 days, reflecting incremental efficiency gains, while other payment categories show no material improvement.

Break down of Overall Claim Expense

We begin by decomposing the overall claims expense into its key components: claim payments, service provider fees, miscellaneous expenses, and the offsetting impact of excesses, salvage, and recoveries.

Claim Payment insights - Per Class

For both Motor Private and Commercial, we examine the pattern of claims split into Legal and Own Damage, as summarized below.

Own Damage Claims

For Own Damage (OD) claims, it is possible to further classify them into: Windscreen, Repairs, Thefts (partial & total), and Total Loss (from accidents).

Key Observations

Motor Private – Parts Supply (Empanelled): Empanelled garages account for approximately 20% of total claim payouts in 2025 under Motor Private, indicating growing adoption of parts supply within the empanelled network.

Service Provider Analysis

Team workload

The graph below illustrates the members of the motor claims team and the actual annual amount of claims approved by each member.

Claims Life Cycle

The graph below shows the time taken from the date of loss to the payment of a claim.

Motor Portfolio Report