Insurance companies in the country will be required to shore up their base capital to match their drop in solvency levels from 412 percent to 131 percent for general insurers and a drop of 206 percent to 136 percent for life insurers.
The impact according to a report by the Actuarial Society of Kenya is a result of the stringent risk based supervision model rolled out by the regulator which further indicates that insurance products such as motor, medical and insurance risk are underpriced which is denying insurance firms of potential revenue.
The need to protect investor funds and policyholders saw the Insurance Regulatory Authority roll out the risk based supervision model in the country.
And now, a report by the Actuarial Society of Kenya shows that the model has had a bearing on the footing of local underwriters whose solvency levels have shrunk considerably with general insurers recording a drop from 412 percent to 131 percent.
Late payment of premiums and a requirement to pay claims promptly has also eaten into insurance firms’ capital adequacy ratios.
The continued generalization in pricing of investment risks in the country by international players has also contributed to missed investment opportunities.
Players in the local actuary sector have also voiced their fears that regulatory disruptions of the financial sector such as the introduction of interest rate caps and International Financial Reporting Standard 9 effective from next year are potential drawbacks for investments.
They called for demystifying of insurance to laymen to increase uptake.