Insurance Companies Given till December to Comply with Capital Requirements

The Insurance Regulatory Authority (IRA) has extended a six-month deadline after finding a third of insurance companies failed to comply with capital requirements.

The regulator conducted the review this mid-July and found the firms to be short in finances.

The main purpose of the new capital requirements is for the companies to reduce their cases of unpaid claims whenever they occur.

The new capital requirements require the companies to either have a gross standard capital raging between Ksh.300 million to Ksh.600 million for general business or have 20% of their net earned premiums of the preceding year – whichever is higher.

Long term insurers are also required to raise their capital to Ksh.400million from the normal Ksh.150 million they set aside or 5% percent of the business liabilities for the financial year.

In addition, the capital for composite underwater will have to shore up to Ksh. 1 billion.

“We gave them six months. We are hoping come December, they will meet the capital adequacy requirements,” said Commissioner of Insurance Godfrey Kiptum.

The COVID 19 pandemic has caused a lot of insurance companies to reduce premium collection and increase claims.

As a result, it leads to a lot of undercutting in the market causing insurance firms to take huge risks when they lack the capacity to settle claims.

The regulator has however introduced this risk-based system in 2017 through a miscellaneous amendment to the Insurance act.

However, the industry players lobbied to have it pushed saying they needed more time to balance their sheets. The risk management system is to help insurance companies in the long run be able to measure risk when they lack capacity when they occur.