There is insufficient information publicly available as to Kenya's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS) in 2003. According to a Financial Sector Assessment Program (FSAP) published by the World Bank in 2005, the Insurance Commission (IC), which is the competent authority within the Ministry of Finance (MoF) for regulating the insurance industry, suffers from a lack of operational independence, as well as a lack of financial and human resources to effectively perform supervision of insurance activities. Furthermore, some shortcomings were identified in the areas of financial reporting and prudential regulation. Hence, according to the same report, the World Bank recommends establishing an independent insurance authority, and revising the Insurance Law and regulations in order to strengthen compliance with IAIS standards. In October 2004, the World Bank approved an International Development Association (IDA) Technical Assistance Credit of US $18 million to help Kenya implement a financial and legal sector reform program. According to a 2005 International Monetary Fund (IMF) Poverty Reduction Strategy Paper, the Government of Kenya is designing a comprehensive strategy for insurance services market development. However, as stated in an IMF 2004/2005 Poverty Reduction Strategy Annual Progress Report published in 2007, this strategy has not yet been implemented.

General Overview

According to a 2004 joint study by the World Bank and the International Finance Corporation (IFC) on the Investment Climate in Kenya, the World Bank and UK Department for International Development (DFID) approved a Financial and Legal Sector Technical Assistance Credit (FLSTAC) to the Government of Kenya (GoK) "in order to address the deficiencies in the legal and institutional framework for finance" (p. 92). On October 14, 2004, the World Bank approved an International Development Association (IDA) Technical Assistance Credit of US$18 million to help Kenya implement a financial and legal sector reform program, as stated on the World Bank website. The overall objective of the program is "to create a sound financial system and strengthened legal framework and judicial capacity that will ensure broad access to financial and related legal services" (WB website). According to a 2005 International Monetary Fund (IMF) Poverty Reduction Strategy Paper, the Kenyan government is designing a comprehensive strategy for insurance services market development. However, as stated in an IMF 2004/2005 Poverty Reduction Strategy Annual Progress Report published in 2007, this strategy has not yet been implemented, and there is insufficient information publicly available as to Kenya's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS) in 2003.

The Insurance Commission (IC) is directly a part of the Ministry of Finance (MoF), and is the competent authority for regulating and developing the insurance industry, as noted on the MoF website. It is responsible for administering the Insurance Act, which was enacted in 1986, advising the government on policy matters regarding insurance, and protecting the interests of policyholders. However, according to a Financial Sector Assessment (FSA) published by the World Bank in 2005, the IC suffers from a lack of operational independence, as well as a lack of financial and human resources to effectively perform supervision of insurance activities. Furthermore, some shortcomings were identified in the areas of financial reporting and prudential regulation. The World Bank recommends establishing an independent insurance authority, consolidating the insurance market, and revising the Insurance Law and regulations in order to strengthen compliance with the IAIS standards. The IC is a member of the IAIS and the African Trade Insurance Agency (ATI).

According to a 2005 World Bank FSA, the insurance market in Kenya is "overpopulated, highly segmented and has a limited core of companies with adequate retention capacity and underwriting policies" (p.10). Indeed, there are 39 insurance companies and 2 reinsurance companies, as noted on the PriceWaterhouseCoopers website. Furthermore, insurance companies generally suffer high loss ratios, ranging from 60% to 75% during the 1998-2000 period, and insurance premiums make up 75% of the USD 300 million of gross premiums written in 2000.

The Principles

ICP 1 Conditions for effective insurance supervision

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 2 Supervisory objectives

II

The IC is responsible for administering the Insurance Act, advising the government on policy matters regarding insurance, and protecting the interests of policyholders, as noted in a 2005 World Bank FSAP. According to a 2005 IC Annual Report, the Commission's objective is to "effectively and professionally regulate the insurance industry by protecting the insuring and general public, strengthening the industry and creating insurance awareness" (p. 4). Nevertheless, there is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 3 Supervisory authority

II

There is insufficient publicly available information as to Kenya's compliance with this principle. The IC is directly a part of the Kenyan MoF, and is the competent authority for regulating and developing the insurance industry, as noted on the MoF website. However, according to a 2005 World Bank FSAP, the IC lacks operational independence, as well as financial and human resources to conduct supervision of insurance activities. Hence the World Bank recommends establishing an independent insurance authority, and strengthening its authority through a revised Insurance Law and regulations.

ICP 4 Supervisory process

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 5 Supervisory cooperation and information sharing

II

Kenya is a member of the IAIS and the ATI. Nevertheless, there is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 6 Licensing

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 7 Suitability of persons

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 8 Changes in control and portfolio transfers

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 9 Corporate governance

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 10 Internal control

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 11 Market analysis

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 12 Reporting to supervisors and off-site monitoring

II

There is insufficient publicly available information as to Kenya's compliance with this principle. According to the 2005 World Bank FSAP, "financial reporting is too infrequent... financial reports are submitted in hard copy only, and no computerized system is in place to conduct financial analysis" (p. 14).

ICP 13 On-site inspection

II

There is insufficient publicly available information as to Kenya's compliance with this principle. According to the 2005 World Bank FSAP, "the limited number of inspectors does not allow the Commission to inspect all companies on an annual basis" (p. 14).

ICP 14 Preventive and corrective measures

II

There is insufficient publicly available information as to Kenya's compliance with this principle. In its 2005 FSAP report, the World Bank recommends de-licensing insurance companies that are unable to implement a timely remedial action plan.

ICP 15 Enforcement or sanctions

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 16 Winding-up & exit from the market

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 17 Group-wide supervision

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 18 Risk assessment and management

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 19 Insurance activity

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 20 Liabilities

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 21 Investments

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 22 Derivatives and similar commitments

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 23 Capital adequacy and solvency

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 24 Intermediaries

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 25 Consumer protection

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 26 Information, disclosure & transparency towards the market

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 27 Fraud

II

There is insufficient publicly available information as to Kenya's compliance with this principle.

ICP 28 Anti-money laundering/ Combating the Financing of Terrorism

II

There is insufficient publicly available information as to Kenya's compliance with this principle.