Kenya’s insurance regulator is tightening oversight of reinsurance placements for 2027, putting greater emphasis on local capacity and requiring insurers to exhaust domestic reinsurance options before seeking approval to transfer risks to foreign reinsurers.
The changes come as the mandatory reinsurance cession to Kenya Reinsurance Corporation (Kenya Re) rises to 25% from 20%, giving the majority state-owned reinsurer a larger share of general insurance treaties from the 2027 renewal cycle.
The Insurance Regulatory Authority (IRA), in a circular issued to insurers, microinsurers, reinsurers and reinsurance brokers, said companies must ensure that local reinsurance capacity is exhausted before seeking approval to place risks with foreign reinsurers.
“Going forward, ensure exhaustion of the local capacity by arranging reinsurance programmes with local reinsurers before seeking approval to reinsure with foreign reinsurers,” said Godfrey Kiptum, IRA chief executive in a circular.
The regulator said it had identified cases where Kenyan risks were being placed overseas with foreign reinsurers that were not registered under the Insurance Act. It also raised concerns over the use of reinsurance brokers that are not regulated or registered in Kenya and have no physical presence in the local market.
Kiptum said IRA had “noted with concern” a trend where some insurers have been flouting reinsurance rules, warning that it will not allow such firms to write new business from 1 January 2027 if their reinsurance arrangements flout rules.
The measures point to a more closely supervised approach to the movement of insurance risk across borders, coming at a time when insurers increasingly use international reinsurance markets to access additional capacity, specialist expertise and protection against large or complex exposures.
For the Kenyan market, the regulatory focus is also significant because it places greater emphasis on demonstrating that domestic capacity has been used before offshore markets are accessed.
Bigger role for Kenya Re
The immediate change for insurers renewing their programmes is the increase in compulsory cessions to Kenya Re amid earlier criticism from industry players. Kenya’s reinsurance industry has several other reinsurers including Continental Reinsurance, East Africa Reinsurance, Ghana Reinsurance, WAICA Reinsurance (Kenya) and ZEP-RE.
Amendments to the Insurance Regulations increased the mandatory cession for general business from 20% to 25%. The requirement applies to each reinsurance treaty and will remain in force until Kenya Re, which is 60% owned by the Kenyan government, is privatised.
The increase means insurers will have to factor the additional five percentage points into the design of their 2027 reinsurance programmes.
For Kenya Re, the change potentially strengthens its role in the domestic reinsurance market by increasing the proportion of general insurance risks it receives through mandatory cessions.
The higher cession also comes as regulators across insurance markets continue to focus on the availability and quality of domestic capacity, particularly for risks that can have significant implications for national economies.
But the IRA’s circular makes clear that the increased Kenya Re cession is only one part of a broader tightening of reinsurance governance.
Insurers have been directed to avoid placing more than 50% of a risk with a single reinsurer unless they provide justification for the concentration. They must also ensure that retention levels under each treaty are neither too low nor too high, taking into account their financial position and risk appetite.
The requirements are intended to ensure that reinsurance programmes are not simply designed around the availability of capacity, but are aligned with insurers’ underlying risk profiles and ability to retain losses.
Offshore capacity under scrutiny
The regulator’s concern over offshore placements centres partly on compliance with Kenya’s legal framework.
The IRA said some insurers had been placing Kenyan risks with foreign reinsurers that were not registered under the Insurance Act, while some programmes were being arranged through brokers that were similarly outside the Kenyan regulatory framework.
Under the new requirements, insurers must first arrange their reinsurance programmes with local reinsurers before seeking approval to use foreign capacity. All facultative placements, whether local or overseas, must also be shared with the IRA before placement.
While the approach does not eliminate access to international reinsurance markets, it places a regulatory test on when and how Kenyan insurers can use that capacity. For international reinsurers seeking Kenyan business, the IRA move makes the availability of local capacity and the regulatory status of the reinsurer key considerations during the renewal process.
It also increases the importance of brokers being able to demonstrate that placements comply with local regulatory requirements.
“All facultative placements both local and overseas shall be shared with the authority before placement,” the IRA said.
Reinsurance quality and contractual certainty
The IRA is also focusing on the quality of reinsurance protection purchased by insurers. The regulator has warned companies against entering arrangements with low-rated or unrated reinsurers, reflecting concerns over whether reinsurance will deliver when claims arise.
The regulator is requiring insurers to submit actuarial reports alongside their 2027 reinsurance arrangements. These reports must assess the adequacy and contractual certainty of the protection purchased.
Among other requirements, actuaries must provide:
- Summary of changes in the current and previous reinsurance arrangement.
- A five-year risk profile based on the size of claims per class of business.
- Changes in the reinsurance management strategy
- Credit rating of reinsurers Reinsurance arrangement per class of business
- Summary of the reinsurance structure actuarial opinion
The actuarial opinion must include whether the insurer’s retention levels are adequate, whether sufficient reinsurance capacity has been purchased and whether the capacity is optimal. The assessment will extend to ceding commissions, minimum deposit premiums and rates for non-proportional treaties.
The move places greater responsibility on insurers to demonstrate that their reinsurance programmes are appropriate for the risks they carry rather than relying primarily on the fact that a programme has been arranged. The IRA has also warned that unfair contract terms will not be accepted in reinsurance treaties.
“Please note that unfair contract terms will not be accepted in the treaties and companies will not be allowed to write any new business effective 1st January 2027 if their reinsurance arrangements will not have been approved before that date,” said Kiptum.
Premium arrears under the microscope
The regulator is also linking approval of 2027 reinsurance programmes to the settlement of existing reinsurance balances. Insurers will have to provide proof that reinsurance balances up to the second quarter of 2026 have been settled, or provide an agreed payment plan with their reinsurers. Failure to pay reinsurance premiums usually voids reinsurance contracts.
The move reflects a wider concern around contractual certainty as the regulator moves beyond checking whether an insurer has reinsurance capacity on paper, but whether the underlying arrangements are financially and contractually capable of responding when required.
The requirement could add another layer of scrutiny to renewal negotiations, particularly for insurers carrying outstanding balances with reinsurers.
Tighter timeline for 2027 renewals
The regulator has set 31 October 2026 as the deadline for insurers to file their final reinsurance cover notes for approval.
Companies have been urged to begin negotiations early, with the IRA warning that they will not be allowed to write new business from 1 January 2027 if their reinsurance arrangements have not been approved before the start of the year.
“You are expected to start your reinsurance negotiations early and the final reinsurance cover notes shall be filed with the Authority for approval latest by 31st October 2026,” Kiptum said.
This gives the 2027 renewal season a significant regulatory deadline, particularly for insurers that rely on a combination of local and international capacity.
Implications for the market
The combination of the higher Kenya Re cession, local-capacity requirement, concentration limits and closer scrutiny of foreign reinsurers means insurers will need to review how they structure their reinsurance programmes and allocate risks.
The regulatory changes could strengthen the role of domestic reinsurers while making access to international capacity more dependent on demonstrated need and regulatory compliance.
At the same time, the requirement to exhaust local capacity before seeking foreign reinsurance could encourage insurers and domestic reinsurers to examine whether existing capacity can support more of the risks currently transferred offshore.
While the rules do not close Kenya to foreign insurers, they reinforce the requirement that overseas participation fits within the country’s regulatory framework and follows evidence that local capacity has been considered.
The changes also put reinsurance strategy more firmly within insurers’ broader risk-management and capital-management decisions.
As climate-related losses, catastrophe exposures and other complex risks evolve, the question for insurers will increasingly be how much risk they can retain, how much capacity they need to buy and where that capacity should come from.
- Kenya Re will be holding its annual CEO summit in Ivory Coast in November.
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