The insurance industry in Kenya is governed by the Insurance Act, Cap 470 Laws of Kenya. The Insurance Regulatory Authority (IRA) is the overall regulator of the industry whose main function is to supervise and control of insurance and reinsurance business in Kenya. The industry is also governed by the guidelines and circulars issued by the Insurance Regulatory Authority.
Shareholding requirements and restrictions
Generally, only companies registered under the Companies Act may be registered as insurers and with at least one - third of the controlling interests, either in terms of shares, paid up share capital or voting rights held by citizens of the EAC Partner states.
The Insurance Act also restricts individual shareholding in insurance companies to 25%. Similarly, a single shareholder, whether an individual or a company, cannot be entitled to appoint over 25% of the board of directors or be entitled to over 25% of the aggregate dividends of an insurer. However, certain restrictions apply such as situations where these entities are corporate entities licensed in Kenya, foreign corporate entities licensed by an insurance regulator in a foreign country, the Government of Kenya or listed companies in a securities exchange.
The Act also restricts appointment of a person as an executive director, managing director, principal officer or other senior management official of an insurer if such person controls, or is beneficially entitled, directly or indirectly, to more than 20% of the paid up share capital or voting rights of the insurer; is entitled to appoint more than 20% of the Board; or is entitled to receive more than 20% of the aggregate dividends of the insurer in any given financial year.
Section 181 of the Act grants the Cabinet Secretary to the National Treasury the powers to exempt any person from any requirements of the Act, including shareholding restrictions.
Minimum capital requirements
The Act provides for minimum capital requirements that must be complied with insurance companies carrying on insurance business in Kenya. In case of general insurance, the paid-up capital must be the higher of Kshs. 600 million, risk-based capital determined from time to time or 20% of the net earned premiums of the preceding financial year.
In case of long-term insurance, the higher of Kshs. 400 million, the risk-based capital determined by the IRA from time to time; or 5% of the liabilities of the life business for the financial year.In determining the minimum capital, government bonds and treasury bills, deposits and cash with a maximum of 10% in any one bank or group of banks and cash and cash equivalent in the case of a new company are taken into consideration. Insurance companies were required to have complied with these minimum capital requirements by 30th June 2020.
The IRA is empowered to direct an insurance company to increase its paid-up capital beyond the minimum capital requirements stipulated under the Act, if the IRA considers it appropriate having regard to the nature, scale and complexity of the insurance business carried on by the company.