Kenya’s recent decision to raise compulsory cession to 25% from 20% is reigniting a familiar debate across African insurance markets on how far regulations should go in trying to retain premiums locally without distorting the market.
The move, aimed at strengthening domestic reinsurance capacity and curbing capital flight, has drawn mixed reaction from industry players. As other African jurisdictions weigh similar policy trade-offs, Kenya’s move offers an early test of whether tighter state-backed retention mechanisms can coexist with a competitive, innovation-driven insurance sector.
One of Kenya’s neighbours, Uganda, requires cumulative cessions of 15% to Uganda Re, 10% to ZEP-RE, and 5% to Africa Re. The CIMA zone applies a similar mechanism benefiting CICA-Re.
Kenya recently gazetted amendment to its insurance regulations, requiring all local insurers to reinsure with Kenya Reinsurance Corporation (Kenya Re) 25% of their reinsurance treaties in respect of general business, up from 20%. Kenya is 60% owned by Kenyan government.
The Association of Kenya Insurers (AKI), in a recent letter to its members, brought the industry to speed with the development.
“The regulations have been amended to increase the mandatory placement from 20% to 25% of general Insurance reinsurance business with the Kenya Reinsurance Corporation. Accordingly, all insurers are now required to reinsure 25% of their general insurance business with Kenya Re. This requirement shall cease to apply on the date the Kenya Reinsurance Corporation Limited is privatised,” said Tom Gichuhi, AKI chief executive, in the letter.
While Kenya’s National Treasury hailed the move as one that will promote financial stability, deepen local market development, and reduce reliance on foreign reinsurers, industry players are not convinced that this is the right move. This, especially that, the market has private reinsurers including Continental Reinsurance Limited, Ghana Reinsurance Company, WAICA Reinsurance (Kenya) Limited and ZEP-RE (PTA Reinsurance Company.
“They (Kenya Re) are not doing enough to market or improve their services. This is a retrogressive move. There is talk about premium protection, but you cannot claim to operate in a liberalised market while introducing such measures,” said Gichuhi.
“Liberal markets promote good governance, stronger marketing and better service to cedants through competition. Guaranteeing 25% of business to one player risks encouraging complacency, with Kenya Re opting to wait for allocations instead of going the extra mile.”
According to the Treasury, the reforms will provide a “clearer and more orderly” framework for reinsurance placements, enhance local retention of premiums, enable faster recoveries in the event of domestic catastrophic losses, and help reduce foreign exchange outflows associated with offshore reinsurance arrangements.
While the measure is expected to strengthen Kenya Re’s balance sheet and bolster the domestic market, industry observers note that it may limit insurers’ flexibility in selecting reinsurance partners, particularly for specialised risks or those seeking competitive international pricing.
Ashok Shah, CEO at APA Apollo Group, says the move will lead to risk concentration and also distort competition. He stressed that many reinsurers are doing a lot in market development and deserve a level playing ground.
“Insurance is about spreading risk, not concentrating it in one entity,” he said, adding that Kenya should have taken cue from the markets which have either scaled down or scraped compulsory cessions.
“Mandatory cession restricts the industry because insurers can get better terms from other reinsurers. It is not going to be a level playing ground. If you are taking 25% of the business, what are you giving back in terms of training, technical support and product development?”
The move means other reinsurers operating in the East African country will experience reduction in their direct share of treaties. The remaining balance of 75% of reinsurance (non-mandatory cessions) will remain available for open-market competitive bidding by the reinsurers.
Tom Gitogo, CEO of the Britam Group, said he believes increasing compulsory cessions is a move in the wrong directions and that African countries should be doing the exact opposite to boost insurance uptake through progressive policies that attract investment and quality underwriting services.
“I believe it is a move in the wrong direction. We should be reducing the mandatory cessions, not increasing. Kenya Re should compete for business the way other reinsurers are doing through offering high quality services,” he said.
Shah shares the same thoughts with Gitogo. He believes the market should have seen a reduction in the compulsory cessions, rather than a rise.
“There should have been a reduction in the mandatory cessions instead of increasing it. During the public participation sessions, almost the whole industry objected to the increase from 20% to 25%,” said Shah.
Shah explained that when there is a claim, the practice is that insurers settle it and then reach out to reinsurers for reimbursement of their share. However, he claimed, Kenya Re has not had a good record when it comes to timely reimbursement and this can put a strain on insurers’ liquidity in case of a big claim.
“It becomes a liquidity strain because insurers pay claims first and then wait to recover from the reinsurer. It is also a counterparty risk because the reliability of the reinsurer is critical,” he said.
Shah believes the higher cessions are going to expose the industry to a large concentration risk that could overburden the State-backed reinsurer yet the market that has other well-established players.
Global Reinsurance Forum (GRF) which brings together reinsurers accounting for over half of global net reinsurance premiums has been pushing for free global flow of risk through open and competitive reinsurance markets.
In a September 2025 publication titled ‘Reinsurance Trade Barriers and Market Access,’ GRF identified 55 major territories, including regional groupings, which have implemented, are in the process of implementing or consider implementing, barriers to the transfer of risks through global reinsurance markets.
“Whilst some jurisdictions have been pursuing liberalisation of their reinsurance markets, it remains concerning to see that significant existing barriers still remain in place and new restrictions to the free flow of reinsurance are being established. Such barriers reduce competition leading to reduced customer choice, higher reinsurance costs and less capacity over the long-term horizon,” said GRF.
Some of the reinsurance trade barriers and market access issues cited by GRF include restrictions on the ability of reinsurers to freely conduct business on a cross-border basis, thereby limiting the capacity of global reinsurers to spread risk globally and to prevent domestic concentrations of risk.
“The use of discriminatory and anti-competitive mechanisms such as compulsory cessions to domestic entities, systems of ‘right of first refusal’, and compulsory, subsidized or monopolistic governmental mechanisms limiting the competitive capacity of global reinsurers to operate on a level playing field. Such practices concentrate risk domestically, whilst limiting customer choice,” said GRF.
The forum noted that such restrictions are being witnessed or are developing to varying degrees in countries such as, Algeria, Argentina, Bangladesh, Belarus, Bhutan, Brazil, Cambodia, China, Colombia, Ecuador, Egypt, Ethiopia, France, Gabon, India, Indonesia, Kenya, Malaysia, Mongolia, Myanmar, Namibia, Nepal, Nigeria, Pakistan, the Philippines, Russia, Saudi Arabia, Senegal, South Korea, Sri Lanka, Sudan, Tanzania, Uganda, Uzbekistan, Vietnam and Zambia.
said varying levels of restriction are witnessed or developing in Australia, Algeria, Argentina, Azerbaijan, Brazil, China, Colombia, Ecuador, Egypt, European Union, Germany, India, Indonesia, Malaysia, Nepal, Netherlands, New Zealand, Nigeria, the Philippines, Singapore, South Africa, South Korea, Tanzania, Thailand, Uganda, Vietnam and Zimbabwe.
The report also cited the groupings of other member countries of the African Union and the grouping of the Conférence Interafricaine des Marchés d’Assurances (CIMA zone) as those having varying levels of restrictions when it comes to reinsurance.
It added that some markets also present restrictions on foreign ownership of subsidiaries and other barriers to the establishment of branches, subsidiaries and operations. Falling in this category are the likes of Algeria, Argentina, Azerbaijan, Bangladesh, Brazil, Cambodia, China, Egypt, Ethiopia, India, Indonesia, Kenya, Malaysia, Moldova, Myanmar, Nigeria, Russia, Saudi Arabia, United Arab Emirates, Uganda, the United Kingdom, the United States, Zambia and Zimbabwe
“This restricts the ability of reinsurers to deliver their full economic benefit by providing local underwriting expertise and direct services to transfer risk out of domestic markets on an open and competitive basis,” said GRF.
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