Licensed bancassurance firms now triple on legal complianceWednesday March 22 2023
The number of banks and microfinance banks offering insurance products has nearly tripled to 21 on increased compliance with regulatory reforms that were rolled out two years ago.
The latest Insurance Regulatory Authority (IRA) data shows the number of lenders offering insurance had hit 21 by March 1, an increase from eight in August last year.
The number which is, however, still below the 27 that were offering bancassurance in 2021, provides hope that more banks and microfinanciers are now complying with the IRA regulations that were introduced in February 2021 to streamline this business.
IRA’s 2021 regulations rules requiring among other things, that bancassurance companies increase minimum capital to Sh5 million, which is five times what is required of brokers (Sh1 million) had from 11 cut the number to just eight last year.
Now top banks including KCB, Equity, Co-operative Bank, NCBA, Absa Bank Kenya, DTB, I&M, Stanbic and Standard Chartered Bank Kenya have all been licensed to transact insurance business as bancassurance intermediaries for the year 2023.
About 34 others, comprising banks and microfinance banks are waiting for IRA clearance, according to Aggrey Mulumbi, the managing director of KCB Bancassurance Intermediary and also the chairman of Bancassurance Intermediaries Association of Kenya.
Read: Bancassurance firms fall 70pc on strict rules
“Last year, it was pretty difficult for the bancassurance entities to change names, share capital structure and appoint directors and qualified principal officers. Some of us took up to six months,” said Mr Mulumbi.
“Prior to the 2021 regulations about 60 banks and microfinance institutions had a bancassurance intermediary.”
The new rules also raised registration fees from Sh1,000 to Sh20,000, with bancassurance firms required to provide Sh10 million as a bank guarantee or a government bond.
IRA also directed that the lenders must own 100 percent of the bancassurance agents, obtain collaboration agreements with insurance companies and prominently display the name of the underwriters in any advertising feature.
Since 2004 when the Central Bank of Kenya granted the Commercial Bank of Africa (now NCBA) a license to operate a bancassurance business, the sector has been attracting more banks and microfinance players seeking to grow by offering comprehensive financial services.
The regulator is yet to start making separate disclosures on the size of the bancassurance business in Kenya.
Read: Equity Group invests Sh400m in insurance division
The Association of Kenya Insurers 2017 study said about Sh6 billion of life business was through bancassurance while that of non-life was estimated at Sh10 billion.