IRA warns in­surance firms of in­creased cap­i­tal­i­sa­tion

The reg­u­la­tor says 10 per cent of the in­sur­ers have not started build­ing their cap­i­tal base as per new law, de­spite the June 2016 dead­line for do­ing so hav­ing lapsed

The Star (Kenya) - - News - RICHARD MUNGAI @Richiy­mungai

In­sur­ers should com­ply with cap­i­tal­i­sa­tion rules, the In­surance Reg­u­la­tory Au­thor­ity has said. The IRA’s in­sis­tence raises prospects of fur­ther con­sol­i­da­tion in the largely un­der­per­form­ing in­dus­try.

The reg­u­la­tor yes­ter­day said about 10 per cent of the in­sur­ers have not started build­ing their cap­i­tal base de­spite the June 2016 dead­line for do­ing so hav­ing lapsed. This was after the amend­ment of Kenya’s In­surance Act last year.

The re­viewed law re­quires short­term (gen­eral) in­sur­ers to in­crease their cap­i­tal from Sh300 mil­lion to Sh600 mil­lion by 2018. Firms in long-term busi­ness (largely life as­sur­ance) should in­crease theirs from Sh150 mil­lion to Sh400 mil­lion.

In­sur­ers are also re­quired to place 40 per cent of the value of their prop­erty in­vest­ments and 30 per cent of stock hold­ings with the IRA.

“There have been com­plains that the law is puni­tive, but we have done our checks and we are sure the rules are not harm­ful at all. The in­surance com­pa­nies have no choice but to com­ply,” said IRA chief tech­ni­cal man­ager Agnes Ndi­rangu yes­ter­day in an in­ter­view on the side­lines of the Ac­tu­ar­ial So­ci­ety of Kenya con­ven­tion in Nairobi.

The As­so­ci­a­tion of Kenya In­sur­ers has spent the bet­ter part of this year lob­by­ing the IRA to delay the im­ple­men­ta­tion of the cap­i­tal rules, to give in­sur­ers a chance to re­struc­ture bal­ance sheets and to ex­pand busi­ness.

The AKI ar­gues that im­ple­ment­ing the rules will be puni­tive to in­sur­ers in the short term.

“If you have heav­ily in­vested in prop­erty, for ex­am­ple, land and build­ings, th­ese are not things you can sell off to­mor­row. We are telling them (IRA) that ‘some of th­ese cap­i­tal charges you have pro­posed are puni­tive’,” said AKI chief ex­ec­u­tive Tom Gichuhi at a re­cent event.

Con­sol­i­da­tion is part of a risk su­per­vi­sion regime adopted by the IRA ahead of a planned reg­u­la­tory over­haul that in­cludes es­tab­lish­ing a Fi­nan­cial Ser­vices Au­thor­ity to con­sol­i­date the frag­mented in­surance land­scape.

The FSA will merge four reg­u­la­tors – the IRA, the Re­tire­ment Ben­e­fits Au­thor­ity, the Cap­i­tal Mar­kets Au­thor­ity and the Sacco So­ci­eties Reg­u­la­tory Au­thor­ity – un­der one um­brella to pro­vide a more or­gan­ised ap­proach to the sec­tor.

A 2016 re­port by con­sul­tancy firm EY sug­gests con­sol­i­da­tion will help Kenya’s in­surance sec­tor to ex­pand by a com­pounded six per cent an­nu­ally in pre­mi­ums through to 2018.


Alexan­dra Forbes Kenya group chief ex­ec­u­tive Sun­deep Raichura, IRA chief tech­ni­cal divi­sion man­ager Agnes Ndi­rangu and NSE chief ex­ec­u­tive Ge­of­frey Odundo dur­ing the Ac­tu­ar­ial So­ci­ety of Kenya Con­ven­tion in Nairobi yes­ter­day

Newspapers in English

Newspapers from Kenya

© PressReader. All rights reserved.