Insurance companies have increased their capital by a total of Sh20 billion in the past two years as they race to meet new requirements by 2021.
Data from the Insurance Regulatory Authority (IRA) shows the underwriters hit Sh148.16 billion last year against Sh140.29 billion in the previous year and Sh128.17 billion in 2015.
The new law was put in place in mid-2016, pushing the insurers to start rushing to raise capital. The Treasury gave the companies up to mid this year to meet the capital adequacy requirements but lobbying by the industry players saw the date pushed to 2021.
“Investors’ equity funds grew by 5.6 per cent to stand at Sh148.16 billion as at the end of December 2017 from Sh140.29 billion reported in the same period of 2016,” said the IRA in its 2018 industry report.
The report added that the key components of the shareholders’ funds were retained earnings at 37.9 per cent, paid-up capital at 28.7 per cent and statutory reserves at 15.4 per cent.
By 2021, general insurance companies will be required to have total capital or shareholders’ funds at a minimum of Sh600 million while long-term (mostly life) must be capitalised to the tune of Sh400 million.
Composite underwriters will be required to have at least Sh1 billion to be allowed to be in business by the same date. The increased capital amounts in the past two years shows that the companies are already preparing to meet the requirements although some industry players say there is need for the regulator to audit each insurer to ascertain the reliability of their financial statements.
“The IRA should move quickly and tell the public what these insurance companies really hold in terms of capital. You cannot be completely sure of the numbers that you see published. They need to supervise the insurers and ensure their numbers make sense,” said Washington Ndegea, chairman of Bima. Intermediaries Association of Kenya (BIAK), which brings together insurance agents and some brokers.
“When you deal with some of the insurers you will doubt the numbers they present, so it is important for the IRA to regularly check on them the same way the central bank does with commercial banks,” said Mr Ndegea.