Markets & Finance

Insurers set to bag larger share of import, medical insurance business


Jubilee Insurance building in Nairobi. Insurers have been pleading for more time to implement new rules, a request that has been turned down by the Insurance Regulatory Authority. PHOTO | FILE

The insurance industry is set to grab a larger slice of the import and medical cover business besides securing more flexible capital rules under new proposals by the Treasury.

On the import business, the insurers are set to enjoy a larger slice of the insurance on Kenyan bound goods, with the Treasury directing the Kenya Revenue Authority (KRA) to enforce the often ignored rule which prohibits placement of Kenyan business with non-Kenyan or foreign insurance markets except under certain circumstances.

“This will also be beneficial to Kenyan importers who under the current practice have limited recourse if anything happens to their imports before they arrive in the country,” said Treasury CS Henry Rotich.

However, PwC sees some challenges in implementing this rule for goods that have to be insured at the port of loading.

In the medical insurance sector, the cover providers are likely to see a rise in business from the elderly, given the new proposals to allow pension schemes put in place medical cover funds that pensioners can access even after they stop working and contributing normal premiums from their salaries.

The flexibility on the new risk-based supervision model will also be welcome news for the insurers, a good number of whom are struggling with the steeper capital requirements. The sector has been bracing for a rise in the number of mergers and acquisitions as a result.

Currently, the accepted form of capital for insurance companies has been equity, but now other forms of capital such as share premium are likely to be accepted.

Under the new law, general insurance companies are required to have at least Sh600 million as capital while life insurers must be capitalised to the tune of Sh400 million. Composite insurers are required to be capitalised to the tune of Sh1 billion.

READ: Insurance companies in race to meet new capital rules

However, companies that carry more risk must hold capital commensurate with it, matching the nature, scale, complexity and risk profile of the business.

“We await to see the wording of the Bill to confirm whether this will be in line with what is available for the banking sector where tier two capital (debt) can be deployed to boost the overall capital position. This will provide flexibility into how funding of insurance companies can be achieved,” said PwC in an analysis of the budget.

Insurers have been pleading for more time to implement the new rules, a request that has been turned down by the Insurance Regulatory Authority.

Although enjoying the raft of wins in the budget, the insurers will still be under pressure over their speed of processing settlements.

In what has turned out to be a win for policy holders who have been previously reduced to waiting for months for settlement.

Mr Rotich proposed that the maximum time for claims to be settled be reduced from 90 to 30 days. “While this is good news for policyholders, it will be a practical challenge for players that write long tail business… it will put significant pressure on the cash flows of insurance companies,” said PwC.