REGULATORY CHANGES AND PERSPECTIVES FOR FUTURE GROWTH Changing Regulatory Landscape Mrs. Agnes Ndirangu Technical Manager-IRA,KENYA

1.Background 2.Regulatory changes in the Kenyan Industry 3.Evolving insurance regulation 4.Commentary 5.Q&A Agenda

Background IRA SUPERVISORY STRUCTURE(1/4) BOARD CONSUMER PROTECTION & EDUCATION LEGAL FRAMEW ORK TECHNI CAL CEO

Background OVERVIEW OF INSURANCE INDUSTRY (2/4) Regulated EntityCount Insurance Companies -General: 24 -Life: 14 -Composite: Reinsurance Companies3 Insurance Brokers166 Reinsurance Brokers2 Medical Insurance Providers 26 Insurance Agents5,000 Other Service Providers200 Regulatory Changes And Perspectives For Future Growth

Background TREND IN THE KENYAN INSURANCE INDUSTRY (3/4) Kenyan Insurance Industry Regulatory Changes And Perspectives For Future Growth

Background COMPOSITION OF KENYA’S INSURANCE BUSINESS(4/4) Premium growth anticipated to accelerate for life business. This is as a result of the new entrants i.e. the multinational Insurance companies. Kenyan Insurance Industry Regulatory Changes And Perspectives For Future Growth

Kenyan Insurance Industry REGULATORY CHANGES IN THE KENYA INDUSTRY Kenyan Insurance industry supervised/regulated by Insurance Regulatory Authority (IRA) IRA is a statutory government agency established under the Insurance Act (Amendment) 2006, CAP 487 of the Laws of Kenya Mandate of IRA: Regulate, supervise and develop the insurance industry in Kenya Current supervisory framework: Compliance Based Supervision (CBS) Under CBS: 1.A set of rules made where insurance players are expected to fully comply 2.The rules were based on past experience and therefore not forward looking 3.The rules applied to all companies no matter the difference in size, risk profile, e.t.c Despite these rules, a number of companies have gone burst, with serious implications. Regulatory Changes And Perspectives For Future Growth

Kenyan Insurance Industry REGULATORY CHANGES IN THE KENYA INDUSTRY IRA is adopting the Risk Based Supervision (RBS) framework to solve the challenge RBS is: 1.Forward looking – incorporates possible future events 2.Flexible – Capital computed on the basis of the size and risk profile of each insurer 3.Incorporates different risks facing insurers: insurance, market, credit and operational risks RBS structure : 1.Minimum Capital Requirements (Risk Based Capital Model) : Quantitative risks 2. Supervisory Review Process (On-site inspections) : Qualitative risks 3.Disclosure and Supervisory Reporting ( FCR, Quarterly and Annual Financial Reports, Actuarial Valuation Reports) IRA facilitates this through the Electronic Regulatory System (ERS) which was launched in early 2013 Regulatory Changes And Perspectives For Future Growth

Kenyan Insurance Industry INTERNATIONAL PRACTICE ON RBS There are three key support elements in implementing RBS: Regulatory Changes And Perspectives For Future Growth

2015 Actuarial Convention RISK BASED SUPERVISION KEY FEATURES OF RISK BASED SUPERVISON ROLLOUT IN KENYA QuantitativeQualitative Requirements &Supervision Disclosure Capital Requirements -Minimum Capital* -Risk Based Capital-standard model *Risk Based Capital-internal model Valuations -Valuation of Technical Provisions (Life) -Valuation of Technical Provisions (Non Life) Investments -Investment Guideline Corporate Governance -Actuarial Function -Risk Management Function -Compliance Function -Internal Audit Function Supervision -Onsite Inspection Module -Treating Customers Fairly (TCF) *Own Risk and Solvency Assessment (ORSA) Reporting Tool -Electronic Regulatory System (ERS) Disclosure Requirements -Financial Condition Report -Quantitative Reporting Templates (QRTs) Introduced in 2013Introduced in 2015Introduced in 2014Date TBC - Changes in Kenya are inline with International Association of Insurance Supervisors (IAIS) Regulatory Changes And Perspectives For Future Growth

Kenyan Insurance Industry EMERGING ISSUES REQUIRING REGULATORY GUIDANCE Some of the key emerging issue in our industry include; 1.Microinsurance: Involves providing insurance products to the low income segment of the population 2.Takaful Insurance: This is an alternative to conventional insurance which incorporates elements of mutuality and ethical finance considerations and is open to all people regardless of faith and background. (IRA has a guideline on this) 3.Oil and gas: Involves providing insurance for the oil and gas industry, usually covering: liability, Workmen’s compensation, equipment, among others. 4.Boda Boda Insurance “Motorcycles”: The Authority is developing a framework on this 5.Bancassurance: Selling of insurance through banks. Regulatory Changes And Perspectives For Future Growth

Possible Impacts to Insurers -Capital Injection -Mergers and Acquisitions -New entrants in the market. -Change of Investment Policy (ALM) -Competitive Pricing -Business Strategy -Own Risk and Solvency Assessment -Management Functions (Corporate Governance) 2015 Actuarial Convention Regulatory Changes And Perspectives For Future Growth

Kenyan Insurance Industry Commentary Risk Based Supervision is here…. Insurers need to continuously asses their risk profile. Corporate Governance functions ought not to be viewed as a tick a box requirement. Actuaries have a chance to add value to the insurance industry. Risk leads to opportunity!! Regulatory Changes And Perspectives For Future Growth

Kenya Insurance Industry Regulatory Changes And Perspectives For Future Growth