The Insurance Regulatory Authority (IRA) has tightened rules on offshore reinsurance, requiring insurers to first exhaust local capacity before seeking approval to place Kenyan risks with foreign reinsurers.
In a circular, the IRA said the increase in the mandatory reinsurance cession to Kenya Reinsurance Corporation (Kenya Re) to 25 percent from 20 percent would be the first move in strengthening local reinsurance capacity as insurers begin renewing their reinsurance contracts.
“Going forward, ensure exhaustion of the local capacity by arranging reinsurance programmes with local reinsurers before seeking approval to reinsure with foreign reinsurers,” said Godfrey Kiptum, IRA chief executive in a circular dated September 16.
Primary insurers transfer part of their risks to reinsurers to whom they pay premiums, reducing their exposure from massive or catastrophic losses.
The regulator’s intervention comes as insurers prepare their reinsurance programmes for 2027, with companies required to begin negotiations early and file final cover notes with the Authority by October 31.
A reinsurance cover note is a temporary but legally binding document that proves a reinsurance contract is in place before the official policy document is issued.
IRA’s order looks set to curb offshore placement of Kenyan insurance risks in a market that has several other reinsurers including Continental Reinsurance, East Africa Reinsurance, Ghana Reinsurance, WAICA Reinsurance (Kenya) and ZEP-RE.
The 25 percent mandatory business for Kenya Re follows amendments to the country’s reinsurance rules. Under the amended rules, every insurer is required to reinsure with Kenya Re a quarter of each of its reinsurance treaties relating to general business.
The requirement for compulsory cessions will only cease if Kenya Re is privatised. The Nairobi Securities Exchange-listed insurer is 60 percent owned by the government.
The regulator said it had “noted with concern” a trend where some insurers have been flouting reinsurance rules, warning that it will not allow such firms to write new business from January 1, 2027 if their reinsurance arrangements flout rules.
“You are expected to start your reinsurance negotiations early and the final reinsurance cover notes shall be filed with the Authority for approval latest by 31st October 2026,” said Mr Kiptum.
“Please note that unfair contract terms will not be accepted in the treaties and companies will not be allowed to write any new business effective 1st January 2027 if their reinsurance arrangements will not have been approved before that date.
IRA raised concerns about several non-compliance practices by insurers including late submission of reinsurance arrangements for regulatory approval and arranging reinsurance through brokers that are not regulated or registered under Kenyan law.
The regulator said some insurers have also been entering into reinsurance arrangements with “lowly rated or unrated” reinsurers and reinsuring with foreign firms not registered under the Insurance Act.
Insurers have further been told to avoid concentrating more than 50 percent of a risk with a single reinsurer unless they provide justification for the placement.
The IRA is also tightening scrutiny on insurers that enter into reinsurance contracts but fail to honour payments.
IRA said companies submitting their 2027 arrangements would have to provide proof that reinsurance balances up to the second quarter of 2026 have been settled, or present an agreed payment plan with the reinsurers.
The regulator says insurers will have to show evidence of actuarial certification of the adequacy and contractual certainty of reinsurance arrangements.
The actuarial reports must cover the insurer’s five-year claims risk profile, changes in its reinsurance management strategy, the credit ratings of reinsurers and the structure of reinsurance arrangements.
Actuaries will also be required to give an opinion on the adequacy of insurers’ retention levels and purchased reinsurance capacity, ceding commissions, minimum deposit premiums and rates for non-proportional treaties.
The IRA measures collectively tighten the conditions under which insurers can transfer risks to overseas markets, giving local reinsurers a more prominent role in Kenya’s insurance market.
“All facultative placements, both local and overseas, shall be shared with the authority before placement,” the IRA said.
