The insurance business in Kenya is profitable, but it is not necessarily easy. Kenya represents one of Africa’s most well-developed and best-regulated insurance markets, with formidable historic growth and even better near-term prospects, but it is fragmented and competition is tough. There are increasing regulatory capital requirements on the horizon, and there is growing scope for consolidation.

Foreign and local capital is likely to continue to flow into the sector, lured not only by the great domestic potential – access to financial services is still modest – but also by the chance to expand into the sizeable regional market. Currently, according to the Association of Kenyan Insurers (AKI), Kenya represents 70% of the East African insurance market, which also includes Tanzania, Uganda, Rwanda and Burundi.

Distribution & Penetration

In recent years, insurance penetration and accessibility have been improving steadily in Kenya. The middle class is growing, more Kenyans have disposable income and there is potential for new demand for insurance. There is rapid urbanisation, giant infrastructure projects, new energy schemes and growing industry. Devolution is already spurring a burst of activity in previously marginalised areas, and underwriters and brokers will need to move away from overconcentration on traditional areas, such as Nairobi, Mombasa and Kisumu.

A number of major infrastructure plans have created investment opportunities in insurance. Some of the main ventures include the construction of the 2nd runway and new terminal at Jomo Kenyatta International Airport, the Lamu Transport Corridor project and the Standard Gauge Railway (SGR) project.

Life insurance penetration is 1.2% of GDP and general insurance about twice that, bringing the total to 3.44% in 2013, according to AKI figures. This measure of insurance penetration dropped to 2.93% in 2014 after GDP was rebased with a 25% increase. Now 4% penetration by year-end looks possible; this compares favourably to the majority of Africa’s markets, although it is slightly down from the 2010 target of 5% by 2015. Worldwide insurance penetration is about 6.5% of GDP, so Kenyan insurers say there is great room for growth. William Maara, managing director of Barclays Life Assurance Kenya, told OBG that, “Given low penetration rates, the Kenyan insurance sector has significant growth potential. This is particularly true following the expansion of the branch network into previously untapped markets; expansion will be further supported by the introduction of new products to the market.” In more developed markets life and long-term insurance is bigger than general insurance, and in South Africa – the most sophisticated market on the continent – life assurance has been estimated at 12.7% of GDP.

The number of Kenyans who have access to insurance products is more positive news. A 2013 survey – the most recent – showed that 16% of the population had access to insurance, up from 9% in 2011. Robert Kuloba, policy research and development manager of the Insurance Regulatory Authority (IRA), told OBG that a new financial access survey is under way: “One of our concerns is that insurance companies have been chasing the same customer base, the middle- to higher-income bracket.”

Figures from the IRA show that gross written premiums rose 20% to KSh157bn ($1.73bn) for the year to December 2014, up from KSh131bn ($1.44bn) in 2013. However, the industry’s combined profit before tax in 2014 was KSh15.5bn ($170.5m), down 13% from the 2013 figure of KSh17.8bn ($195.8m), partly because heated competition and fraud pushed underwriting losses in key segments, including private motor insurance. In January 2014, incoming assurer Old Mutual predicted gross written premiums to grow at a compound annual rate of 18% in the next five years.


Insurance is framed by the Insurance Act No. 487 of 1984, which was amended seven times between 2003 and 2014 and revised in 2013, which covers registration, assets, liabilities, solvency and investments, inspection, rates, claims, assignment, brokers, reinsurance and other aspects. It sets minimum capital requirements; it mandates that at least a third of the ownership must be East African and blocks any one person from owning more than 25% except in exceptional circumstances.

Insurers must keep separate accounts for each class of life insurance and each class of general insurance they underwrite. There are plans to create a financial services bill, bringing together all financial services under one regulator. In the budget statement 2015 National Treasury Secretary Henry Rotich said the minimum capital would increase to KSh600m ($6.6m) for general insurance, and KSh400m ($4.4m) for long-term insurance business by June 2018 and he proposed to introduce “risk-based capital requirements” and to move away from rules and to a “principle-based investment framework” (see analysis).

The IRA’s 2013-18 strategic plan has three goals: promoting consumer education and protection; promoting an inclusive, competitive and stable insurance industry; and offering quality customer service. The IRA’s Kuloba said the regulators’ priorities include improving risk management, along with widening access and reaching new audiences, including though careful use of technology and improved oversight (see analysis). Another regulatory challenge is excise duty, made up of 10% of commission. For an insurer that is 10% of commissions received from reinsurance, which Vijay Srivastava, CEO of GA Insurance, says comes straight off the bottom line.

If all insurers chase the middle- to higher-income bracket, the atmosphere of tough competition will continue. Instead insurers should look more widely, aiming to reach farmers and small businesspeople who are currently left out but actually generate a significant proportion of Kenya’s business and economic activity. A key growth area will be insurance for small and medium-sized enterprises (SMEs). AIG Insurance CFO Victoria Ipomai told OBG: “The growth over the past 10-15 years has mostly been the informal sector but most of the SMEs are not insured. We need to find out why as a sector. The common thread is product innovation so that we come up with products that meet the real needs of the target population.”


Life assurance gross premium income was KSh56.5bn ($621.5m) in 2014, up from KSh44.3bn ($487.3m) the previous year, according to the IRA. The first quarter of 2015 showed growth continuing, with gross premium income of KSh16bn ($176m). The IRA listed 25 long-term insurance underwriters and three reinsurers in March 2015. The top five companies accounted for nearly 64% of the gross premium income over the quarter, according to OBG calculations using IRA figures, leaving 20 companies to share 36%. Net claims for 2014 amounted to KSh33.6bn ($369.6m), up 45% over 2013.

British American Investments Company (Britam) dominates, holding nearly 19% of the market in the first quarter of 2015. Britam is a diversified financial services group and reaches Uganda, Rwanda, Tanzania and Mozambique, among others. Jubilee Insurance has 15% and it was number one in the first quarter of 2014, with nearly 20% share of the market. ICEA Lion has a 13% share, Pan African has 9% and CIC 8%.


The IRA lists 36 short-term or general-insurance companies and three reinsurers as of March 31, 2015. The top 10 firms accounted for nearly 55% of the fast-growing gross premium income for the quarter. Total gross premium income was KSh101.3bn ($1.11bn) for 2014, up from the previous year’s KSh86.7bn ($953.7m), and the rate quickened to KSh34.4bn ($378.4m) in the first quarter of 2015. Net claims were up 22% to KSh42.6bn ($468.6m) in 2014.

The five largest insurers included Jubilee Insurance at number one with nearly 13% of the total premium income, up from 10% in the first quarter of 2014, according OBG calculations based on IRA figures. APA Insurance came in second with 8.5% and in third place was CIC Insurance Group with 7%, after dropping back from second place in 2014; UAP had 5% and Heritage 5% in the first quarter of 2015.


However, a detailed examination of insurance segments shows that some of the biggest are not profitable and this poses key challenges. It is an offence to drive in Kenya without third-party insurance and traffic police are eagerly vigilant to any infraction. As a result, mandatory motor insurance dominates the general insurance sector; although it is widespread, it is often not profitable for insurers.

Total premiums for commercial motor insurance for first quarter of 2015 were KSh5.6bn ($61.6m), or 16% of all gross premiums, while private motor insurance added another KSh4.9bn ($53.9m), or 14%, and public service vehicle insurance brought the share of motor insurance up to 35% of gross premium income.

According to Srivastava, “The private motor is making a loss for the industry as a whole; the commercial motor makes some profit. There are many reasons; number one it’s a cartel of the repairer and the importers of parts. Number two, for third-party claims and workmen’s compensation are the ‘ambulance chasers’”. A number of companies have said motor insurance is not profitable and the IRA shows losses of nearly KSh1.1bn ($12.1m) across the segment as a whole in the first three months of 2015 on private motor cover, although insurers did earn KSh634m ($6.97m) in profits on commercial motor.


The National Hospital Insurance Fund (NHIF) is the primary provider of health insurance in Kenya. Its mandate is to ensure that all Kenyans can access affordable health services. The NHIF registers all eligible citizens from both the formal and informal sector, and allows voluntary membership for those working in the informal sector. In 2015 rates for coverage saw income-based increases.

Medical cover accounted for KSh8.9bn ($97.9m) of premium income in the first quarter of 2015, or 26% of the total for general insurance, and it is reported to chart compound growth over 32% a year. However 75% of companies made losses on their medical insurance, partly because of price undercutting, fraud and soaring health care costs.

According to Ipomai, “The issues are price and segmentation, case management and plugging the fraud. That would involve a heavy investment in technology, but it could significantly reduce the impact of losses.”

Companies are trying innovative approaches to reach customers, with strategies such as linkages with health care providers or personnel, or through mobile operators. Changamka MicroHealth is one example, which in January 2014 launched savings products linked to an outpatient smartcard and offers health microinsurance with Britam and Safaricom.

Other Segments

Fire is a popular policy in Kenya, accounting for 11% of the total gross premium income in the quarter to March 2015, which is nearly all made up of industrial fire cover. While other key corporate segments like marine, aviation and transport offer potential, the majority of the business is offshore. A 2014 study by Lloyd’s comments “The majority of aviation cover is placed by local retail brokers with international insurance companies outside Kenya.”

According to a 2007 act, all employers must have an insurance policy – or provide security – or compensate employees for work-related injuries or diseases contracted in the course of their employment. This category made up 6% of gross premium income for the first quarter of 2015. Theft insurance made up 5% of gross premium income to March 2015, and personal accident coverage came in at similar levels, with 4% of total gross premium income.

Agriculture & Weather-Based

Most Kenyans work in farming, which leaves a lot of potential for climate risk and agricultural coverage. Ipomai told OBG that insurers need to venture wider afield than traditional insurance products as they look for opportunities in Kenya and the region. She says agricultural and weather-based products, introduced five years ago, still have potential. The non-profit organisation FSD Kenya has been experimenting with weather-based insurance since 2005, with backing from the World Bank, the International Livestock Research Institute and Swiss Re. The key products are index-based crop insurance and index-based livestock insurance. Take-up has been slow. For example a 2013 study by Adaptation to Climate Change and Insurance (AACI) noted that 2000 farmers bought a livestock pilot scheme in 2009-10; it was dropped the next year and when revived only 625 bought it the following year. Somewhat more successful was the Kilimo Salama crop-insurance scheme launched by Syngenta, Safaricom and UAP in 2009, that evolved into the new company Acre Africa in 2014, which reports that it insured 233,795 farmers in Kenya and Rwanda in 2014.

Other companies working in the field, both literally and figuratively, include Jubilee, APA, CIC and UAP, some of which have been cooperating on index-based insurance pilots. Tax incentives from the government would encourage companies to dig more deeply, and the IRA’s Kuloba told OBG that the government is working on a national agricultural insurance policy, which will provide a framework for encouraging new lines of insurance across the segment.


Banks have made great strides in extending financial services to the wider population through the innovative use of technology and adaptations to existing products. Many insurers say their products do not translate well to low-cost models and that specialised institutions are needed to develop successful products to help the low-income segment and largely rural population cope with the many risks that reinforce poverty. The IRA has been working on regulations to permit specialised microin-surance providers (see analysis).

Distribution Channels

Just as in other services, direct selling via the internet and mobile services is contributing to disintermediation and threatens brokers and agents. Already comparison websites are springing up, and mobile platforms are being leveraged. Brokers are under threat from bancassurance and from direct selling, although there are many reasons why insurance will continue to depend on face-to-face selling. The IRA’s Kuloba says 70% of all business still comes through agents, “Miss-selling still remains a challenge. We insist on training and retraining and we encourage them to self-regulate.”

The agents’ representative body, Bima Intermediaries Association of Kenya (BIA), said 10,000 agents are operating but the IRA licenses only 4300 of them, with the majority concentrated in Nairobi and other urban centres. The IRA is encouraging self-regulation.

Improved service delivery for brokers may be increasingly important in the coming years, if they are to maintain market share against new forms of service provision. Insurance companies look at the 79% mobile penetration rate, for example, and in some cases – as with Changamka MicroHealth, linked to Safaricom’s M-Pesa – phones are being used as a means of product delivery. In July 2015 mobile company Airtel Kenya announced a partnership to offer three insurance products at rates from KSh250 ($2.75) a month with partners MicroEnsure for processes and Pan Africa Life Assurance to underwrite the product. MicroEnsure CEO Stephen Kamanda said it would reach up to 12.6m Kenyans in the informal sector who do not have access to insurance: “There are opportunities to merge mobile technology and innovation with insurance services.” Orange Kenya and CIC Insurance offer Orange Bima, which combines life assurance and insurance for mobile phones.

Kenyan Players Expanding

Movement has expanded outwards as well as inwards. Most larger Kenyan insurers have expanded into neighbouring East African countries in the past decade. Britam has subsidiaries or affiliated operations in Uganda, Tanzania, Malawi, Mozambique, South Sudan and Rwanda. ICEA Lion, formed out of a 2011 merger with Insurance Company of East Africa and Lion of Kenya Insurance Company, operates in Uganda and Tanzania.

CIC Insurance said it expected its South Sudan and Uganda operations to contribute to revenues in 2015 and it would also start work in Malawi. Tanzania and Rwanda are seen as tougher markets to succeed in, but market leader Jubilee Insurance says its operations in Tanzania, Uganda, Mauritius and Burundi have all seen growth in premiums written. East Africa’s contribution to revenues is also growing; for example, UAP Holdings, in its annual report to December 2014, says, “Contribution from our businesses outside Kenya increased from 28% to 36% of total revenues” (it operates in Uganda, South Sudan, Tanzania and Rwanda). Srivastava told OBG that a company’s knowledge of the local market is critical, and enables the company to set up and grow a new operation there, thus avoiding some of the “baggage” of taking over an existing company.

Foreign Insurers Entering

Unsurprisingly, the expectations of double-digit premium growth, great potential in segments like mobile and agricultural cover, and the regional footprint of many local insurers have made the sector an attractive target for foreign investors. In June 2015 Barclays Africa, part of the UK-based bank, announced it had bought a 63.3% stake in First Assurance, Kenya’s 10th-largest general insurer, by paying shareholders KSh2.2bn ($24.2m) and injecting a further KSh700m ($7.7m) into capital. First Assurance also offers general insurance in Tanzania and life assurance in Kenya. UK financial services group Old Mutual bought 23.3% of life insurer UAP group for KSh8.9bn ($97.9m) in January 2015 and a few weeks later announced it would pay KSh14.2bn ($156.2m) to buy another 37.3% from private-equity investors such as Africinvest, Abraaj and Swedfund, as well as local investor Centum Investment – bringing its total holding to 60.7%. Kenyan financier Joseph Wanjui remains the largest individual shareholder and noted in January 2015 that the combined UAPOld Mutual Kenya still plans to list on the Nairobi Securities Exchange. Old Mutual had entered the east African market in 2013 when it bought 67% of Kenya’s Faulu, East Africa’s second-largest deposit-taking microfinance institution. South Africa-based Metropolitan and Momentum International (MMI Holdings) acquired a majority 75% stake in Cannon Assurance in a KSh2.4bn ($26.4m) deal. Metropolitan Kenya has consolidated its life assurance operations with Cannon but has kept the short-term insurance arm as a separate business operating under its own licence.

In September 2014, the UK’s Prudential insurance announced it had bought Shield Assurance, the life assurance arm of Blue Shield Insurance Company, which is under statutory management, for KSh1.5bn ($16.5m). Part of the money was to be used to pay outstanding benefits on matured policies. Morocco’s Saham Finances bought loss-making general insurer Mercantile Insurance in January 2013 and rebranded it as Saham. The North African group has operations in 22 African countries after snapping up stakes in insurers in Nigeria, Angola and Rwanda.

South Africa’s Sanlam controls Pan Africa Insurance Holdings. Swiss Re, the world’s second-largest reinsurer, bought a minority stake in Apollo Investments from private equity firm Leapfrog in October 2014. Leapfrog bought 60% of Resolution Insurance from Germany’s African Development Corporation and other investors in a KSh1.6bn ($17.6m) transaction. Recent local mergers and acquisitions (M&A) activity includes Britam’s 2014 move to purchase 99% of the shares of Real Insurance Company in a deal worth KSh1.4bn ($15.4m). In March 2015, Pan Africa Insurance Holdings announced it had bought a 51% stake in Gateway Insurance in a KSh561m ($6.17m) deal and also made public plans to acquire further shares. Pan Africa had previously exited the market in 2011 to concentrate on life insurance lines.


While there is a lot of potential in the market, there are certainly still plenty of challenges, including fraudulent claims. Industry participants have estimated that 20% of motor insurance claims could be fraudulent. Estimates are higher for medical claim fraud, thought to be 15-40% of claims. More precise figures are difficult to come by. A survey by audit firm KPMG says fraud swallows some 25% of premiums, pushing up prices and depressing demand. Motor claims fraud often involves collusion with loss assessors, garages and sometimes staff from insurance companies. Other types of fraud includes selling a car abroad and claiming it is stolen or even adding damaged panels to a car to claim for a fictitious accident and then putting back the undamaged originals later. Hospitals are supporting fraudulent claimants by providing documents for false claims of major surgery and overpricing other treatments. They have also passed off relatives and friends and allowed them to pretend to be the insured person. IRA has been encouraging insurers to share data on fraudulent cases, a policy that has met with only limited success.


Kenya’s reinsurance market is tightly controlled, with few participants and prescribed proportions of premiums to be allocated to some reinsurers. Insurance companies must cede 20% of their reinsurance business to Nairobi Securities Exchangelisted Kenya Re, which had 71% market share in March 2015 and is 60% owned by the government. Africa Re, owned by all African countries jointly, gets a 5% compulsory share of reinsurance, while Zep-Re, owned by the 19 countries of the Common Market for Eastern and Southern Africa (COMESA), enjoys a 10% share, leaving only 65% for the private firms.

The IRA reported gross premium income of KSh1.6bn ($17.6m) for the three reinsurers listed for life business for 2014; the three are Kenya Re, East African Re and Continental Re. Insurers’ premiums totalled KSh56.4bn ($620.4m), but with no underwriting profits. There was a gross premium income of KSh14.8bn ($162.8m) for general insurance in the same period and insurance companies’ premiums totalled KSh101.3bn ($1.1bn); this led to KSh569m ($6.3m) in underwriting profits.

East African Re, in which First Chartered Securities and ICEA Insurance each have a stake of 25% and other insurers have smaller shares, is enjoying fast growth and increasing market share quickly. It has nearly 59% of the share of life-business reinsurance, up from 27% a few months earlier, and 35% of general reinsurance, up from 21%. Continental Re has the third-biggest slice of the reinsurance market and 11% market share in the general business.


A sustained influx of capital will prove crucial, and insurance companies will need to build capital quickly. They need this capital for the heavy spending required to leverage new technology so they can reach effectively into new markets, including the giant lower-income sector, with considerably smaller transaction sizes. They will also need to invest in technology to stay competitive. The regulator is only adding to pressure to increase the companies’ bulk, and the new risk-based capital requirements will lead to large capital increases, so they can do business insuring the large new infrastructure and other projects; this will likely lead to further consolidation.