Insurance firms in East Africa are set to report their worst financial returns in five years as weakened currencies, low market penetration and depressed equity markets take a toll on their performances.

According to Kenya’s Listed Insurance Companies Analysis for 2015 by Cytonn Investment, insurance firms will register a 48 percent fall in after-tax profits, which is more than the 17.29 percent fall recorded in 2014.

Some of the leading insurance players such as UAP Holdings, Liberty and Pan African Insurance Ltd have already posted falls of at least 25 percent in their after tax profits, last year.

UAP Holdings which operates in Kenya, Uganda, Tanzania, South Sudan, Rwanda and Democratic Republic of Congo recorded its profits at $ 8.8 million, a 46 percent drop from the $16.4 million that it made in 2014.

The firm attributed the loss to the weakened local currencies against the dollar, high operating costs and low levels of investment in the region.

In Uganda, UAP Holdings lost $5.2 million in foreign exchange for is property business which was mainly blamed on the Ugandan shilling’s 17.5 percent fall against the dollar last year.

Analysts warned that the introduction of taxes on insurance products in the 2014/15 financial year will continue to adversely affect the sector in Kenya. Stamp duty in the East Africa’s largest economy was last year increased almost tenfold to $10 from $1.44 in 2013.

“These costs, put together, raise a client’s total spend on insurance, affecting gross premium levels while narrowing the company’s income portfolio, Salima Nakiboneka, an analyst of fixed income and equities at Crested Capital, told The East African.

NIC Holdings, a Kenyan insurance company, blamed its fall on profits in the first half of 2015 to the new tax regulations.

According to Association of Kenya Insurers (AKI), Insurance firms have not yet appealed to the masses in the region, with the their leading products being health and motor insurance

Their penetration in the region is still very low with Kenya leading with a 3 percent penetration, Tanzania is second with 2.3 percent, while Uganda and Rwanda have 0.8 percent penetration.

The low penetration levels were blamed on the insurance firms plans emphasis on the middle class, with the majority low class left behind.

“The current range of products across the region targets the middle and upper class, leaving the majority low-income earners out,” Tom Gichui, AKI executive officer told The East African.