REGULATORY CHANGES AND PERSPECTIVES FOR

FUTURE GROWTHChanging Regulatory Landscape

Mrs. Agnes NdiranguTechnical Manager-IRA,KENYA

1. Background

2. Regulatory changes in the Kenyan Industry

3. Evolving insurance regulation

4. Commentary

5. Q&A

Agenda

Background IRA SUPERVISORY STRUCTURE(1/4)

BOARD

CONSUMER PROTECTION &

EDUCATION

LEGAL FRAMEW

ORK

TECHNICAL

CEO

BackgroundOV E RV I E W O F I N S U R A N C E I N D U S T RY

( 2 / 4 )Regulated Entity Count

Insurance Companies -General: 24 -Life: 14 -Composite: 12

50

Reinsurance Companies 3

Insurance Brokers 166

Reinsurance Brokers 2

Medical Insurance Providers

26

Insurance Agents 5,000

Other Service Providers 200

Regulatory Changes And Perspectives For Future Growth

BackgroundTREND IN THE KENYAN INSURANCE INDUSTRY (3/4)

Kenyan Insurance IndustryRegulatory Changes And Perspectives For Future Growth

BackgroundCOMPOSITION OF KENYA’S INSURANCE BUSINESS(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.

Kenyan Insurance IndustryRegulatory Changes And Perspectives For Future Growth

Kenyan Insurance Industry

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 comply2. The rules were based on past experience and therefore not forward looking3. 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 And Perspectives For Future Growth

Kenyan Insurance Industry

REGULATORY CHANGES IN THE KENYA INDUSTRY

IRA is adopting the Risk Based Supervision (RBS) framework to solve the challenge

• RBS is: 1. Forward looking – incorporates possible future events2. Flexible – Capital computed on the basis of the size and risk profile of each

insurer3. Incorporates different risks facing insurers: insurance, market, credit and

operational risks

• RBS structure :1. Minimum Capital Requirements (Risk Based Capital Model) : Quantitative risks2. Supervisory Review Process (On-site inspections) : Qualitative risks3. 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 And Perspectives For Future Growth

Kenyan Insurance Industry

INTERNATIONAL PRACTICE ON RBS

• There are three key support elements in implementing RBS:

Regulatory Changes And Perspectives For Future Growth

Strong laws and regulations: Insurance

Act and guidelines

Greater level of Reporting and

Disclosure: Quantitative Reporting Templates and

FCR’s

Effective corporate governance: Actuarial,

Audit, Risk and Compliance functions

2015 Actuarial Convention

RISK BASED SUPERVISIONKEY FEATURES OF RISK BASED SUPERVISON ROLLOUT IN KENYA

Quantitative Qualitative Requirements &Supervision

Disclosure

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

Corporate Governance-Actuarial Function-Risk Management Function-Compliance Function-Internal Audit Function

Supervision-Onsite Inspection Module-Treating Customers Fairly (TCF)*Own Risk and Solvency Assessment (ORSA)

Reporting Tool-Electronic Regulatory System (ERS)

Disclosure Requirements

-Financial Condition Report-Quantitative Reporting Templates (QRTs)

Introduced in 2013 Introduced in 2015Introduced in 2014 Date TBC

- Changes in Kenya are inline with International Association of Insurance Supervisors (IAIS)

Regulatory Changes And Perspectives For Future Growth

Kenyan Insurance Industry

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 And Perspectives For Future Growth

Possible Impacts to Insurers-Capital Injection

-Mergers and Acquisitions

-New entrants in the market.

-Change of Investment Policy (ALM)

-Competitive Pricing

-Business Strategy

-Own Risk and Solvency Assessment

-Management Functions (Corporate Governance)

2015 Actuarial ConventionRegulatory Changes And Perspectives For Future Growth

Kenyan Insurance Industry

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 And Perspectives For Future Growth

Kenya Insurance IndustryRegulatory Changes And Perspectives For Future Growth