The Insurance (Reinsurance Arrangements) Guidelines, 2022

GAZETTE NOTICE NO. 3637
THE INSURANCE ACT
(Cap. 487)
THE INSURANCE (REINSURANCE ARRANGEMENTS)
GUIDELINES, 2022
STATEMENT OF INTENT
THE Insurance (Reinsurance Arrangements) Guidelines are made
by the Insurance Regulatory Authority pursuant to section 3A (1) (g)
of the Insurance Act and are intended to provide standards for the use
of reinsurance and other forms of risk transfer, standards to be applied
to manage the selection, implementation, monitoring, review, control
and documentation of reinsurance arrangements and controls and
reporting standards for risk transfer programmes. Citation
1. These Guidelines may be cited as the Insurance (Reinsurance
Arrangements) Guidelines, 2022. Interpretation
2.

or risk transfer programmes. Citation
1. These Guidelines may be cited as the Insurance (Reinsurance
Arrangements) Guidelines, 2022. Interpretation
2.

In these Guidelines, unless the context otherwise requires—
“appointed actuary” means an external and independent actuary
with qualifications as indicated in section 2 of the Act;
“aggregate exposure” means the amount of reinsurance coverage
provided by a single reinsurer to a cedant during a specified period for
all reinsurance losses likely to be sustained during that period;
“cedant” means an insurer who enters into a reinsurance
arrangement with a reinsurer;
“cession” means the amount of insurance risk transferred to a
reinsurer by a ceding company may be the whole or a portion of a
single risk;
“cut–through” means reinsurance contract provision that allows a
party other than the cedant and the reinsurer to have rights under the
reinsurance contract;
“facultative reinsurance” means reinsurance of individual risks by
offer and acceptance;
“fronting arrangements” means a reinsurance arrangement where
the cedant transfers the entire risk to a reinsurer;
“maximum event retention” means the maximum amount retained,
calculated separately by class of business, by the insurer in respect of
the accumulation of all losses arising from a defined event;
“mismatch risk” refers to where the terms and conditions of a
reinsurance contract differs from that of the policy issued by a cedant
for the class of business reinsured leading to a gap in reinsurance
protection;
“retention” means the amount of risk which a cedant or a reinsurer
keeps for its own account; and
“treaty reinsurance” means a reinsurance contract under which the
cedant agrees to cede and the reinsurer accepts a portfolio of risks of a
particular class or classes of business.

einsurance contract under which the
cedant agrees to cede and the reinsurer accepts a portfolio of risks of a
particular class or classes of business.

Application
3. These Guidelines shall apply to all insurers. Purpose of the Guidelines
4. The purpose of these Guidelines is to set—
(a) standards for the use of reinsurance and other forms of risk
transfer;
(b) standards to be applied to manage the selection,
implementation, monitoring, review, control and
documentation of reinsurance arrangements; and

r;
(b) standards to be applied to manage the selection,
implementation, monitoring, review, control and
documentation of reinsurance arrangements; and

29th March, 2022 THE KENYA GAZETTE 1725
(c) controls and reporting standards for risk transfer programmes. General Principles
5.

29th March, 2022 THE KENYA GAZETTE 1725
(c) controls and reporting standards for risk transfer programmes. General Principles
5.

Reinsurance arrangements shall take the following issues into
account—
(a) the financial strength and claims payment ability of the
reinsurers in question;
(b) the risk and capital management strategy of the cedant;
(c) the appropriateness of the reinsurance strategy given the
underlying insurance portfolios;
(d) the structure of the reinsurance programme;
(e) the extent to which relevant functions are outsourced;
(f) the levels of aggregate exposure to a single reinsurer or
different reinsurers being part of the same group;
(g) the proportion of business ceded so that the net risks retained
are commensurate with the insurer’s financial resources;
(h) the resilience of the reinsurance programme in stressed claims
situations;
(i) the extent of any credit risk mitigation in place;
(j) processes for—
(i) timely and complete reporting and settlements;
(ii) approving, monitoring and confirming the placement of
facultative reinsurance;
(iii) monitoring the performance and potential exhaustion of its
reinsurance programme; and
(iv) ensuring that it has accurate and complete reinsurance
documentation of contract terms and conditions;
(k) the mismatch risk between the underlying policies and the
reinsurance contracts;
(l) controls of reinsurance arrangements suitable in the context of
the nature, scale and complexity of the business and the extent of their
reinsurance exposures.

of reinsurance arrangements suitable in the context of
the nature, scale and complexity of the business and the extent of their
reinsurance exposures.

Responsibility of the Board of Directors
6. (1) The roles and responsibilities of the board of directors with
regard to an insurer’s reinsurance arrangements shall be to —
(a) oversee the development of a reinsurance management strategy
and ensure it is implemented;
(b) establish appropriate monitoring mechanisms to ensure that the
strategy is being delivered and complied with;
(c) review the reinsurance strategy at least biennially and
whenever there have been material changes in the company’s
circumstances;
(d) ensure regular reviews of the performance of the reinsurance
programme, to ensure that it functions as intended and
continues to meet its strategic objectives;
(e) put in place an appropriate reinsurance function for the day–
to–day management of the reinsurance programme;
(f) set limits on the net risk to be retained per class of business and
aggregate for the company;
(g) determine the maximum foreseeable amount of reinsurance
protection to be obtained from approved reinsurers; and
(h) seek the advice of appointed actuary on the soundness of risk
and capital management strategy before entering into,
modifying or terminating a reinsurance arrangement.

f appointed actuary on the soundness of risk
and capital management strategy before entering into,
modifying or terminating a reinsurance arrangement.

(2) The head of the reinsurance function shall have a minimum
qualification of certificate of proficiency in reinsurance practice from a
recognised institution. Responsibility of Management
7. The roles and responsibilities of management with regard to
insurer’s reinsurance arrangements are to —
(a) implement the insurer’s reinsurance management strategy;
(b) develop and implement procedures with respect to reinsurance
arrangements;
(c) periodically analyse and assess the quality and performance of
reinsurance arrangements and report to the Board on a regular
basis and upon request;
(d) set underwriting guidelines that specify the types of insurance
to be underwritten, policy terms and conditions and aggregate
exposure by class of business;
(e) establish and document limits on the amount and type of
insurance that will be covered by treaty reinsurance;
(f) establish and document criteria for placing and accepting
facultative cover; and
(g) establish internal control mechanisms to ensure that
reinsurance arrangements comply with the reinsurance
management strategy and procedures and with legal and
regulatory requirements. Reinsurance Management Strategy
8.

ngements comply with the reinsurance
management strategy and procedures and with legal and
regulatory requirements. Reinsurance Management Strategy
8.

(1) Insurer’s reinsurance management strategy shall be part of
the risk and capital management strategy. (2) Every insurer shall have a written reinsurance management
strategy, approved by the company’s Board of Directors that is
appropriate to the insurer’s overall risk profile.

ave a written reinsurance management
strategy, approved by the company’s Board of Directors that is
appropriate to the insurer’s overall risk profile.

(3) At a minimum, the reinsurance management strategy of an
insurer shall—
(a) identify the insurer’s risk tolerance;
(b) identify the level of cessions appropriate for the insurer’s risk
tolerance;
(c) identify, and clearly articulate, any other reasons for seeking
reinsurance cover, such as risk diversification, financing of
new business or expertise transfer;
(d) determine the types of reinsurance arrangements that are
appropriate to the insurer’s risk tolerance;
(e) set out how liquidity will be managed where there is a timing
mismatch between the payment of claims and the receipt of
reinsurance recoveries;
(f) consider peak exposures and seasonality in the insurance
portfolio;
(g) consider appetite for credit risk;
(h) consider the capital management strategy; and
(i) define and document the insurer’s approach for reinsurance
management framework, identifying the procedures for—
(i) the reinsurance cover(s) to be purchased;
(ii) the selection process of reinsurers; and
(iii) monitoring reinsurance programs, including reporting and
internal control systems. (4) An insurer shall review and submit its reinsurance
management strategy to the Authority every two years.

g reporting and
internal control systems. (4) An insurer shall review and submit its reinsurance
management strategy to the Authority every two years.

Reinsurance arrangements
9. (1) Insurers may enter into inward reinsurance arrangements,
provided that—
(a) any such arrangements are clearly identified and fully taken
into account in the insurer’s reinsurance strategy;
(b) the insurer has provided for adequate reserving for any inward
reinsurance business; and
(c) the terms and conditions of the reinsurance cover must be
compatible with those of the underlying insurance business in
order to avoid mismatch risk. (2) An insurer shall submit reinsurance arrangements for the
following year to the Authority on or before the 30th September every
year.

ismatch risk. (2) An insurer shall submit reinsurance arrangements for the
following year to the Authority on or before the 30th September every
year.

5:45 PM THE KENYA GAZETTE 29th March, 202217261726
Quantum Reinsurance Cover
10. In calculating the quantum of reinsurance cover required,
insurers shall apply the following methodology—
(a) calculation of the quantum of maximum loss arising from the
catastrophic event determined by the Board to be the most
financially damaging to the insurer;
(b) in calculating the maximum loss, the Board shall include the
impact of this catastrophic event on all classes of business
underwritten by the insurer;
(c) establish the maximum event retention; and
(d) effect reinsurance cover between the maximum loss and the
maximum event retention. Written Procedures
11. An insurer shall have in place written procedures in respect
of—
(a) timely payments of reinsurance premiums to reinsurers; and
(b) timely recovery of reinsurance claims. Internal Controls
12.

cedures in respect
of—
(a) timely payments of reinsurance premiums to reinsurers; and
(b) timely recovery of reinsurance claims. Internal Controls
12.

An insurer shall put in place adequate internal control systems
to ensure that—
(a) all underwriting is carried out in accordance with the
company policy;
(b) planned reinsurance cover is in place at all times;
(c) claims are reported to the reinsurer in a timely manner and in
accordance with the reinsurance agreement;
(d) reinsurance claims payments are being promptly recovered;
and
(e) material deviations from items (a) to (d) above are identified
and reported to Management and the Board of Directors. Prohibited Practices
13. An insurer shall not enter into fronting arrangements unless
prior approval is granted by the Authority in writing. Fronting Arrangements
14.

ices
13. An insurer shall not enter into fronting arrangements unless
prior approval is granted by the Authority in writing. Fronting Arrangements
14.

(1) In requesting for approval of fronting arrangements and
overseas reinsurance placement, an insurer shall provide the following
information in respect to the risk being fronted—
(a) sum insured;
(b) previous sum insured, where applicable;
(c) premium rate charged;
(d) previous premium rate charged, where applicable;
(e) date of inception and expiry of cover;
(f) proof of declination from the mandatory cession reinsurers;
(g) description of the risk including the terms and conditions; and
(h) reinsurers participating in the risk, their credit rating and their
proportions. (2) Each fronting arrangement shall be submitted to the Authority
in writing and in addition to the deposits required under section 32 of
the Act, the insurer shall maintain a further deposit equivalent to 10%
of the premium payable. Protection of Policy Holders
15. An insurer shall put in place measures intended to protect the
policyholders including the use of cut–through provisions. Appointed Actuary
16. An insurer shall ensure that the appointed actuary provides an
assurance on the appropriateness and adequacy of the insurer’s
reinsurance strategy and arrangements. Enforcement
17.

he appointed actuary provides an
assurance on the appropriateness and adequacy of the insurer’s
reinsurance strategy and arrangements. Enforcement
17.

Where the Authority determines non–compliance with the
provisions of these Guidelines, it may take any intervention prescribed
in the Act, including—
(a) require an insurer to invest in a specified manner;
(b) restrict or prohibit an insurer from investing in certain asset
classes or individual assets to safeguard insurance funds;
(c) disqualify or revoke the appointment of an individual in a
position as board member, management or key person in a
control function;
(d) impose additional reporting requirements;
(e) withdraw or impose conditions on the business license;
(f) impose monetary penalties as provided for under the Act; and
(g) take any other action as may be deemed necessary. ABDIRAHIN ABDI,
Chairperson,
Insurance Regulatory Authority. GEOFREY KIPTUM,
Chief Executive Officer and
Commissioner of Insurance,
Insurance Regulatory
Authority. GAZETTE NOTICE NO. 3638
THE INSURANCE ACT
(Cap.

GEOFREY KIPTUM,
Chief Executive Officer and
Commissioner of Insurance,
Insurance Regulatory
Authority. GAZETTE NOTICE NO. 3638
THE INSURANCE ACT
(Cap.

487)
THE INSURANCE (CLAIMS MANAGEMENT)
GUIDELINES, 2022
STATEMENT OF INTENT
THE Insurance (Claims Management) Guidelines are made by the
Insurance Regulatory Authority pursuant to section 3A(1)(g) of the
Insurance Act and are intended to provide principles of management of
insurance claims by an insurer as well as the market conduct relating to
the claims process and to ensure prompt payment of claims and to
promote consumer confidence in the insurance industry. Citation
1. These Guidelines may be cited as the Insurance (Claims
Management) Guidelines, 2022. Interpratation
2. In these Guidelines, unless the context otherwise requires—
“claim” means a request by a claimant to an insurance company
for compensation based on the terms of the insurance policy and
includes claims related expenses;
“claimant” means a person who has a right to a settlement arising
from a contract of insurance;
“insurer” means a person, registered under the Act, who carries
on insurance business; and
“service provider” refers to Risk Managers, Motor Assessors,
Insurance Investigators, Loss Adjustors, Insurance Surveyors and
Claim Settling Agents registered under the Act. Application
3.

gers, Motor Assessors,
Insurance Investigators, Loss Adjustors, Insurance Surveyors and
Claim Settling Agents registered under the Act. Application
3.

These Guidelines shall apply to all insurers, intermediaries and
the service providers. Purpose
4. The purpose of these Guidelines is—
(a) to ensure prompt payment of claims; and
(b) to promote consumer confidence in the insurance industry. General Requirements
5. The board of an insurer shall develop, document and
implement policies and procedures for effective claims management. Pre–Loss Information
6. (1) An insurer shall, at the time of issuing an insurance policy,
provide in writing the procedures to be followed by a claimant when
lodging a claim.