REGULATORY CHANGES AND
PERSPECTIVES FOR FUTURE
GROWTH
Changing Regulatory
Landscape
Mrs. Agnes Ndirangu
Technical Manager-IRA,KENYA
Agenda
1. Background
2. Regulatory changes in the Kenyan
Industry
3. Evolving insurance regulation
4. Commentary
5. Q&A
Background
IRA SUPERVISORY STRUCTURE(1/4)
BOARD
CEO
TECHNI
CAL
LEGAL
FRAMEW
ORK
CONSUMER
PROTECTION &
EDUCATION
Background
OVERVIEW OF INSURANCE INDUSTRY
(2/4)
Regulated Entity
Insurance Companies
-General: 24
-Life:
14
-Composite: 12
Reinsurance Companies
Insurance Brokers
Reinsurance Brokers
Medical Insurance
Providers
Insurance Agents
Other Service Providers
Count
50
3
166
2
26
5,000
200
Regulatory Changes And Perspectives For Future Growth
Background
TREND IN THE KENYAN
INSURANCE INDUSTRY (3/4)
Regulatory Changes
Kenyan Insurance
And Perspectives
Industry For Future Growth
B ac k g ro u n d
CO M P O SI T I O N O F K E NYA’ S
I NSU R A NC E B U SI NESS(4 / 4 )
• Premium growth anticipated to accelerate for life business.
• This is as a result of the new entrants i.e. the multinational Insurance
companies.
Regulatory Changes
Kenyan Insurance
And Perspectives
Industry For Future Growth
REGULATORY CHANGES IN THE KENYA
INDUSTRY
• Kenyan Insurance industry supervised/regulated by Insurance Regulatory Authority (IRA)
• IRA is a statutory government agency established under the Insurance Act (Amendment)
2006, CAP 487 of the Laws of Kenya
• Mandate of IRA: Regulate, supervise and develop the insurance industry in Kenya
• Current supervisory framework: Compliance Based Supervision (CBS)
• Under CBS:
1. A set of rules made where insurance players are expected to fully comply
2. The rules were based on past experience and therefore not forward looking
3. The rules applied to all companies no matter the difference in size, risk profile,
e.t.c
•Despite these rules, a number of companies have gone burst, with serious implications.
Regulatory Changes
Kenyan Insurance
And Perspectives
Industry For Future Growth
REGULATORY CHANGES IN THE KENYA
INDUSTRY
IRA is adopting the Risk Based Supervision (RBS) framework to solve the challenge
• RBS is:
1.
2.
3.
Forward looking – incorporates possible future events
Flexible – Capital computed on the basis of the size and risk profile of each
insurer
Incorporates different risks facing insurers: insurance, market, credit and
operational risks
• RBS structure :
1. Minimum Capital Requirements (Risk Based Capital Model) : Quantitative
risks
2. Supervisory Review Process (On-site inspections) : Qualitative risks
3.
Disclosure and Supervisory Reporting ( FCR, Quarterly and Annual Financial
Reports, Actuarial Valuation Reports)
•
IRA facilitates this through the Electronic Regulatory System (ERS) which was launched in early
2013
Regulatory Changes
Kenyan Insurance
And Perspectives
Industry For Future Growth
INTERNATIONAL PRACTICE ON RBS
•
There are three key support elements in implementing RBS:
Regulatory Changes
Kenyan Insurance
And Perspectives
Industry For Future Growth
RISK BASED SUPERVISION
KEY FEATURES OF RISK BASED SUPERVISON ROLLOUT IN KENYA
Quantitative
Qualitative Requirements
&Supervision
Capital Requirements
-Minimum Capital*
-Risk Based Capital-standard model
*Risk Based Capital-internal model
Valuations
-Valuation of Technical Provisions (Life)
-Valuation of Technical Provisions (Non
Life)
Investments
-Investment Guideline
Introduced in 2013
Disclosure
Corporate Governance
-Actuarial Function
-Risk Management Function
-Compliance Function
-Internal Audit Function
Reporting Tool
-Electronic Regulatory
System (ERS)
Supervision
-Onsite Inspection Module
-Treating Customers Fairly
(TCF)
*Own Risk and Solvency
Assessment (ORSA)
-Financial Condition Report
-Quantitative Reporting
Templates (QRTs)
Introduced in 2014
Introduced in 2015
Disclosure Requirements
Date TBC
- Changes in Kenya are inline with International Association of Insurance Supervisors (IAIS)
Regulatory
2015
Changes
Actuarial
AndConvention
Perspectives For Future Growth
EMERGING ISSUES REQUIRING
REGULATORY GUIDANCE
Some of the key emerging issue in our industry include;
1.Microinsurance: Involves providing insurance products to the low income segment of
the population
2.Takaful Insurance: This is an alternative to conventional insurance which incorporates
elements of mutuality and ethical finance considerations and is open to all people
regardless of faith and background. (IRA has a guideline on this)
3.Oil and gas: Involves providing insurance for the oil and gas industry, usually
covering: liability, Workmen’s compensation, equipment, among others.
4.Boda Boda Insurance “Motorcycles”: The Authority is developing a framework on
this
5.Bancassurance: Selling of insurance through banks.
Regulatory Changes
Kenyan Insurance
And Perspectives
Industry For Future Growth
Possible Impacts to Insurers
-Business Strategy
-Capital Injection
-Own Risk and Solvency Assessment
-Mergers and Acquisitions
-Management Functions (Corporate Governance)
-New entrants in the market.
-Change of Investment Policy (ALM)
-Competitive Pricing
Regulatory
2015
Changes
Actuarial
And
Convention
Perspectives For Future Growth
Commentary
•Risk Based Supervision is here….
•Insurers need to continuously asses their risk profile.
•Corporate Governance functions ought not to be viewed as a tick a box
requirement.
•Actuaries have a chance to add value to the insurance industry.
•Risk leads to opportunity!!
Regulatory Changes
Kenyan Insurance
And Perspectives
Industry For Future Growth
Regulatory Changes
Kenya Insurance
And Perspectives
Industry For Future Growth