Insurance Regulatory Authority Licensing in Kenya: Insurers, Brokers and Agents

Insurance Regulatory Authority licensing in Kenya determines who may carry on insurance business, who may sell or broker it, and what capital an insurer must hold. The Insurance Regulatory Authority (IRA) administers the Insurance Act (Cap. 487), and operating without the right licence is a criminal offence. This guide covers the licence categories, the capital floors for insurers, the application route and the penalties for unlicensed business.

The Insurance Act and the Insurance Regulatory Authority

The Insurance Regulatory Authority is established under section 3 of the Insurance Act, and section 3A sets out its objects and functions. Section 19(1) provides that, except as the Act otherwise allows, only a person licensed under the Act may carry on insurance business in Kenya, or outside Kenya in respect of Kenya business other than solely reinsurance. Section 19(2) treats a Kenya-resident person or Kenya-established body that carries on insurance business anywhere else in the world as an insurer carrying on that business within Kenya for the purposes of the Act.

Categories of IRA Licence

Insurers

No one may be licensed as an insurer unless it meets the minimum capital requirements in the Second Schedule (section 23(1)). The Schedule requires paid-up capital equal to the higher of the following:

• General insurance business: KES 600 million, the risk-based capital determined from time to time, or 20% of the net earned premiums of the preceding financial year.
• Long-term insurance business: KES 400 million, the risk-based capital determined by the IRA, or 5% of the liabilities of the life business for the financial year.
• General reinsurance business: KES 1 billion, the risk-based capital determined by the IRA, or 20% of the net earned premiums of the preceding financial year.

The IRA may amend the Second Schedule by Gazette order, subject to National Assembly approval (section 23(2) and (3)). Section 23(3A) also lets the IRA direct an individual insurer to hold more capital, having regard to its business and risk profile. Check the current Schedule and any directive before you model your capital plan.

Brokers, agents and other intermediaries

Section 150(1) prohibits anyone from carrying on the business of a broker, agent, risk manager, motor assessor, insurance investigator, loss adjuster, insurance surveyor, medical insurance provider or claims settling agent unless licensed under the Act. Section 150(2) also bars anyone from using any of those titles in a way that suggests they are licensed when they are not. The detailed capital, indemnity and qualification rules for each category sit in the Insurance Regulations and IRA guidelines, so confirm them with the IRA for your category.

Medical insurance providers

Section 150A requires every person engaged in placing medical insurance business with an insurer for a commission, fee or other remuneration to apply to the IRA for a medical insurance provider licence. The Act applies the broker registration and regulation provisions to medical insurance providers with the necessary changes.

Takaful

Section 19A provides that a person must not undertake takaful insurance business unless licensed under the Act. The Cabinet Secretary, after consulting the IRA, may make Regulations for the licensing and supervision of takaful operators. A takaful operator should therefore ask the IRA which regulations and guidance currently apply to its model before it applies.

How an Insurer Applies

Section 30 requires an application for an insurer’s licence to be in the prescribed form and accompanied by supporting documents, including the applicant’s constitutional documents and a certified copy of any published prospectus. Under section 31, the Board must be satisfied on a list of matters before licensing. These include:

• the applicant has the share capital and assets required by sections 22 and 23;
• the deposit required by section 32 has been made;
• the applicant has adequate reinsurance arrangements or an exemption under section 29;
• it has adequate reserves, and adequate assets in Kenya;
• its likely volume of business and earning prospects are adequate;
• it is, and is likely to remain, able to comply with the Act and with regulations and directions under it; and
• it has an adequate number of technically qualified and competent staff.

A well-prepared application therefore combines the capital evidence, a reinsurance programme, an actuarial basis for reserves, and a staffing plan. Section 22 also restricts the licensing of certain persons, so check it against your shareholders and directors.

Penalties for Unlicensed Insurance Business

Under section 19(3) a person who carries on insurance business in contravention of section 19(1) commits an offence and is liable on conviction to a fine not exceeding KES 5 million. A person who continues after conviction commits a further offence on each day of continuation, with a fine of up to KES 500,000 for each such offence (section 19(4)). A natural person is liable to a fine, imprisonment for up to two years, or both (section 19(5)). Where a body corporate is convicted, the Commissioner may apply to the court for its liquidation (section 19(6)).

Foreign and Offshore Placements

Section 20 restricts directly or indirectly placing Kenya business, other than reinsurance, with an insurer not licensed under the Act without the prior approval required by that section. Brokers and agents who arrange cover with offshore insurers should read the section before placing risks.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.