How To Start an Insurance Company In Kenya

How To Start an Insurance Company In Kenya

Kenya’s insurance industry is attractive to both domestic and foreign investors. However, starting an insurance company requires careful planning and following the rules set by the Insurance Regulatory Authority (IRA). The IRA is a government body established by law (the Insurance Act) to oversee, manage, and promote the insurance sector in Kenya. It has a Board of Directors responsible for ensuring the Authority operates according to the Insurance Act. IRA official site.

Here’s a detailed breakdown on How To Start an Insurance Company In Kenya:

1. Feasibility Study and Business Plan:

Market Research: Conduct thorough market research to understand Kenya’s insurance landscape, identify gaps, and assess the viability of your proposed business model.
Business Plan Development: Formulate a comprehensive business plan that outlines your target market, risk, product offerings, marketing strategy, financial projections, and management team structure.

2.Range of Participants in the Insurance sector in Kenya

a)Insurers and Reinsurers:

Insurers: The core players, companies licensed by the IRA to directly sell insurance policies to businesses and individuals. They collect premiums, assess risks, and pay out claims based on policy terms.
Reinsurers: Insurers who provide insurance coverage to other insurers, offering them protection against large or catastrophic losses. This helps spread risk and ensures insurers have the financial capacity to meet their obligations fully.

b)Brokers and Managing Insurance Professionals (MIPs):

Brokers: Intermediaries who act on behalf of clients, seeking and comparing insurance policies from various insurers to find the best coverage at the most competitive rates. They do not directly underwrite insurance but receive commissions from insurers for successful placements.
Managing Insurance Professionals (MIPs): Licensed professionals who act as intermediaries between insurers and large commercial clients. They can manage a client’s entire insurance program, negotiating terms, placing coverage, and handling claims.

c)Other Service Providers:

Loss Adjusters: Independent professionals who investigate claims, assess the extent of damage, and recommend settlements to insurers.
Actuaries: Use mathematical and statistical analysis to assess risk and calculate insurance premiums.
Surveyors: Assess the value of property or equipment for insurance purposes.

d)Agents: Represent a specific insurance company and sell its insurance products directly to clients. They receive commissions from the insurer for policies they sell.

Let’s Discuss the Requirements for Insurer Registration Requirements in length, For a comprehensive overview of other insurance industry players like brokers, agents, and service providers, please refer to these helpful linked resources: Brokers and Managing Insurance Professionals (MIPs), Agents and Other service Providers;

Requirements for Licensing of a New Insurance Company in Kenya

A. Licensing of new insurers.

The Authority issues licenses for insurers to transact the following types of business:
1. Microinsurance business
2. Long term insurance business
3. General insurance business
4. Long term reinsurance business
5. General reinsurance business

B. Documents and criteria required to grant requested approvals
The licensing requirements of an insurer are detailed in Sections 27A, 30, and 31 of the Insurance Act and Regulation 7. The promoters of a new insurer first submit a proposal to the Authority. The submission should include the following:

A feasibility study report as outlined under Regulation 7 of the Insurance Regulations.
A certified copy of the published prospectus, if any.
Details of the promoters.

Additional information may be required based on the submission. Once the Authority is satisfied with the proposal, approval in principle for licensing of the proposed company is granted subject to compliance with the following requirements;

An applicant filled in the prescribed form (Form No. 30-1) together with the appendices.
Licensing fee of:
KES 150,000 for an insurer
KES 150,000 for a micro insurer
KES 250,000 for a reinsurer.
Certified copy of a certificate of incorporation and CR12 form from the Registrar of Companies.2
Certified copy of the Articles and Memorandum of Association of the company.
Minimum paid up share capital as prescribed in the Insurance Act:
Evidence that the promoters/shareholders have put in the required minimum paid-up share capital.This must be in the form of cash and confirmed by the external auditors.
Details of the shareholders and shareholding structure of the company.
Details of Directors, Principal Officer, and Management staff of the insurer for approval in line with Sections 27A, 31 and 68 of the Insurance Act.
A statement of all the classes of business the proposer intends to transact. The classes of business are prescribed in the schedules to the Insurance Act.
Specimen proposal and policy forms for all the classes of business the proposer intends to transact.
The premium rates the proposer intends to apply under each class of business during the year of licensing.
A certificate in connection with the long-term insurance business by an Actuary that the premium rates terms and conditions are sound and workable.
Proposed reinsurance arrangements and reinsurance strategy.
A certificate from Central Bank of Kenya specifying the amounts and details of deposits under section 32 of the Insurance Act (equivalent to 5% of the total assets).
The proposed contract documents with Insurance Agents and Brokers.
A statement of how the insurer intends to cover its initial administrative costs.
The name of the insurer should be in line with Section 190 of the Act and Regulation 15 (4) of the Microinsurance Regulations.

Once the applicant complies with all the requirements, the Authority grants the insurer a license to operate.

3. Timeframe required to complete application process:

Timeframe is approximately 60 days for each phase but varies based on completeness of the application documents.

4. Establishing Operations:

Company Formation: Register your company with the Registrar of Companies in Kenya. This involves choosing a unique name, appointing directors, and completing necessary legal paperwork.
Securing Office Space: Secure a suitable office space to house your insurance operations.
Hiring Staff: Recruit a qualified and experienced team to manage your insurance business. Look for individuals who possess relevant licenses required for specific insurance activities in Kenya.
Technology Infrastructure: Invest in a robust technology infrastructure to manage policy administration, claims processing, and customer relationship management.
Marketing and Distribution Strategy: Develop a comprehensive marketing and distribution strategy to reach your target market and build a strong brand presence.

Additional Considerations for Foreign and Local Investors:

Partnerships: Consider partnering with a reputable Kenyan insurance company or brokerage firm to leverage their local expertise and distribution network. Also join like minds i.e The Association of Kenya Insurers (AKI) which offers a one-stop shop for insurance companies seeking to amplify their voice, expand their network, stay informed on industry trends, develop their workforce, and enhance their credibility. By joining AKI, your company gains access to advocacy efforts, industry connections, market research, training programs, and a reputation for professionalism, ultimately strengthening your position in the Kenyan market.

Legal and Regulatory Compliance: Ensure you fully understand and comply with all Kenyan insurance laws and regulations, including the Insurance Act, prudential guidelines issued by the IRA, and anti-money laundering (AML) regulations.

Taxation: Familiarize yourself with Kenyan tax laws applicable to insurance companies, including corporate income tax, withholding taxes, and insurance premium tax.

IRA licensed Insurers 2024;

FAQs;

1.Is it mandatory to join the Association of Kenya Insurers (AKI)?

No, it is not mandatory to join AKI. However, membership offers significant benefits such as advocacy, networking, access to market research, training programs, and enhanced credibility.

2. How long does it typically take to get an insurance license in Kenya?

The approval process can take several weeks or months, depending on the completeness of your application and the IRA’s workload. Usually, 60 days but varies based on completeness of the application documents.

3. What are the ongoing regulatory requirements for insurance companies in Kenya?

Companies must comply with the Insurance Act, prudential guidelines issued by the IRA, anti-money laundering (AML) regulations, and tax laws applicable to insurance companies.

4.What resources can help me learn more about starting an insurance company in Kenya?

The Insurance Regulatory Authority (IRA): https://www.ira.go.ke/
The Association of Kenya Insurers (AKI): https://www.akinsure.com/
Consulting with Kenyan lawyers, accountants, and business consultants.

5. Is the Kenyan insurance market attractive for foreign investors?

Yes, Kenya’s insurance sector offers promising opportunities for foreign investors due to its growing economy, rising insurance penetration rates, and a regulatory framework that encourages foreign participation.

6. What are the key steps involved in establishing an insurance company in Kenya?