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detailed changes affecting the insurance industry contained in the finance act, (no. 14), 2015

ISSUE FINANCE ACT CHANGE/REGULATIONIMPLICATIONEFFECTIVE  
Prescribed capital and solvency requirements By amending section 2 of the Insurance Act, inserting a new definition of the term ‘capital adequacy ratio’ in the proper sequence. The target level of the capital adequacy ratio determined by the Authority to be used in determining the solvency of an insurer. Finance Act (No. 14) 2015 Effective date 1st October, 2015.
By amendment to section 23 (2) deleting the word “minister’ and replacing with ‘authority’ To empower the Authority to publish in the Gazette the schedule on capital to allow the prescription of risk based capital.
Amendment to section 23(3) of the Act by deleting the by deleting the words “or under section 28 Harmonizing with  the amendment of the schedule on minimum capital requirement
Amendment to section 23(3) by inserting a new subsection (3A) giving the authority power to issue directives increasing the minimum capital adequacy requirements on a case to case basis. To empower the authority to prescribe the risk based capital based on the mature scale and complexity of the insurance business and its risk profile.
Amendment to section 28 of the Act by deleting the word ‘minister’ appearing in subsection (2) and replacing it with the word “authority’. By empowering the authority to amend the schedule on minimum assets of insurer in Kenya.
 By amending section 30 of the Act by adding a new paragraph (i) to introduce investment plan as a licensing requirement.  Investment plan for a period of not less than three years shall now be licensing requirement.
By repealing section 41 of the Act and replacing it with a new section on margin of solvency which also empowers the authority to determine admitted assets and liabilities.
  •  The authority is empowered to prescribe capital adequacy ratio for purpose of determining the solvency margin.
  • The authority is empowered to determine the admitted assets and liabilities.
Minimum Capital Requirements  

Insurance Act is amended by replacing the schedule on minimum capital requirements as follows;
a) General insurance Business for insurance companies; the higher of;

i) Six hundred million shillings
ii) Risk based capital determined from time to time; or
iii) 20% of net earned premium of the preceding financial year.

b) Long Term Business for insurance companies : the higher of

i) Four hundred million;
ii) Risk based capital determined by the Authority from time to time; or
iii) 5% of the liabilities of the life business for financial year.

c) In case of Reinsurance Company (General Business); the higher of ;

i) One billion ; or
ii) Risk based capital as determined by the Authority from time to time ; or
iii) 20% of the net earned premium of the preceding financial year.

d) In case of reinsurance company (Long term Business)

i) Five Hundred Million;
ii) Risk based capital as determined by the Authority from time to time; or
iii) 5% of the liabilities of the life business for the financial year.

The minimum capital requirement as prescribed shall consist of,

i) Government bonds and Treasury Bills;
ii) Deposit and cash with a minimum of 10% in any one bank; and
iii) Cash and cash equivalent in case of a new company.

 
  • The adoption of risk based capital.
  • Enhanced capital for the stability of the insurance industry.
  • Authority empowered to come up with the prescribed risk based capital.
 

Finance Act (No. 14) 2015
Effective date; 1st October, 2015-new company.
30th June 2018-existing company

Provisions relating to investment

Insurance Act is amended as follows;
By amending section 47 of the Act by deleting the word “Minister’ and replacing with the word “cabinet Secretary”

To harmonise the provisions of the Act with constitution of Kenya, 2010.  Finance Act (No. 14) 2015
Effective date 1st October 2015.
By repealing section 47 of the Act and replacing with a new section 48 in respect to the investment of the Assets of insurer to be done in accordance with investment guidelines issued by the authority. The assets of the insurer to be invested in accordance with the investment guideline issued by the authority.
Insurance Act is amended by repealing section 50 and replacing with new section 50 requiring the insurer to submit to the Authority its investment policy. Insurer will be required to submit their investment policy in manner, form and period prescribed by the Authority.
Registration of Agents  

 

  • By amending section 151 by deleting subsection 1 (b) to remove the requirement of certification that the person appointed has sufficient knowledge and experience to act as agent as well the requirement of letter of appointment as an agent at the time of registration.
  • By introducing in section 151 a new subsection (1 A), requiring the register agent to seek the appointment of the insurer before
 
  • To allow registration of agents by the authority upon meeting the requisite qualification.
  • Agents shall be required to seek the appointment of insurers before transacting business in their name in accordance with the principle of agency.
 

Finance Act (No. 14) 2015
Effective date 1st October 2015.

 

Proceeds of crime and anti-money laundering Section 24 is amended requiring financial reporting center to send the information received by it or derived from inspection to appropriate law enforcement authorities, any intelligence agency, or any other appropriate supervisory bodies for further handling if it has reason to believe that the transaction or activities involve money laundering or financing terrorism. The Authority to receive such information as a supervisory body for its supervisory purposes.  

Finance Act (No. 14) 2015
Effective date 1st October 2015.

LN 104 OF 2015 The second schedule to the regulation is amended by deleting the entire schedule. The admitted assets and admitted liabilities schedule to be determined by the Authority. 11th June 2015.

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