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Kenya: Broker Faults Kimunya On Insurance
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The Nation (Nairobi)
2 July 2008
Posted to the web 2 July 2008
Kaburu Mugambi
Nairobi
A leading insurance broker says the Finance minister should have tightened insurance companies' capital requirement to strengthen the industry.
Eagle Africa Insurance Brokers said the minister did not mention anything on minimum capital requirement for insurers in his Budget speech although he fixed the core capital for banks and mortgage institutions.
"Therefore consolidation of the current over-traded market - 47 underwriters - is unlikely," said Eagle Africa executive director David Farrar. In his 2008/2009 Budget Finance minister Amos Kimunya increased core capital requirement for banks and mortgage financial institutions from the current Sh250 million and Sh200 million to Sh1 billion over a period of two years.
However, during the 2007/2008 Budget, the minister increased paid up capital for three categories of insurance companies.
Required
Life insurance companies were required to raise their core capital from Sh50 million to Sh150 million, general insurance from Sh100 million to Sh300 million and composite insurance companies to Sh450 million from Sh150 million.
The insurance companies were required to comply with this new paid up capital requirement in two years. Mr Farrar said that it was a good gesture by the Government to convert the Commissioner of Insurance department to Insurance Regulatory Authority. The authority reports to a board of directors and is no longer a department of the Finance ministry.
"[We] will still need a strong and independent chief executive officer," Mr Farrar said on Monday during a presentation on insurance in the 2008/2009 Budget at a Nairobi hotel. He said that virtually all insurance policies now carry a political risks and terrorism exclusion - meaning they do not compensate for loss arising from political or terrorist activities.
Mr Farrar said the legal position relating to the post-election violence losses was still unclear and may eventually be tested by court cases.
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He said insurance companies have paid claims but on a without prejudice basis, meaning the payment does not imply an admission of liability.
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