Insurers will be required to increase to 25 percent the portion of business that they must mandatorily place with Kenya Reinsurance Corporation (Kenya Re), in a move that will boost revenues for the Nairobi Securities Exchange-listed firm.
The National Treasury has proposed new regulations that will see insurers cede at least a quarter of their reinsurance business to Kenya Re, up from the current 20 percent. The reinsurer is 60 percent owned by the government.
Kenya is among the countries that require a certain portion of reinsurance premiums to be channeled to their national champions in a bid to reduce capital flight and grow local under-writing capacity.
Under the draft Insurance (Amendment) Regulations, 2025, National Treasury Cabinet Secretary John Mbadi says the change is designed to strengthen local insurance and reinsurance markets, promote financial stability and reduce reliance on foreign reinsurers.
“To strengthen domestic reinsurance capacity and deepen market development, the National Treasury proposes to increase the mandatory cession to Kenya Re to 25 percent of every treaty reinsurance placement in both the general and long-term classes,” reads the memorandum backing the proposal.
Insurance companies make money by assuming risks of certain events such as fires, accidents or floods in exchange for a premium.
However, when assuming such risks, they are obligated to ensure the maximum payouts in case the risks crystallise do not bankrupt them.
Cession therefore allows an insurer to reduce their risks by passing on some of them to the reinsurance market, as well as a portion of the profits. The 25 percent compulsory cession will mean a quarter of these risks must be placed with Kenya Re.
The proposal seeks to make the 25 percent mandatory cession a continuing requirement, remaining in force until Kenya Re is privatised or the regulations are further revised. This will be a departure from the current practice in which the reinsurer reapplies for the mandatory cession each year.
“The draft amendment provides for a 25 percent mandatory cession of treaty business to Kenya Re, to operate on a continuing basis and to supersede the existing sunset clause, remaining in force until Kenya Re is privatised or the regulations are further amended,” reads the memorandum.
Treasury added that the changes will provide a “clearer and more orderly” framework and ensure higher local retention of premiums, potentially faster recoveries on domestic catastrophic losses and moderated foreign exchange outflows on outward placements of business.
The Insurance Regulatory Authority (IRA) will be required to ensure Kenya Re aligns its retrocession arrangements with the resultant risk profile that will come from the increased business.
“The proposed amendments are intended to take effect on January 1, 2026 to apply to all treaty reinsurance contracts entered for the year 2026 and for subsequent years until the corporation is privatised,” said Godfrey Kiptum, IRA commissioner of insurance, in a stakeholder engagement notice.
While the move may strengthen Kenya Re’s balance sheet and improve domestic capacity, it could also limit the flexibility of insurers in choosing reinsurance partners, especially those seeking specialised coverage or competitive pricing abroad.
The measure aligns with a broader policy trend across African markets aimed at retaining more insurance premiums within national economies and reducing exposure to volatile global reinsurance markets.
