Electronic Regulatory System tipped to streamline insurance

From left: Ministry of Information, Communication and Technology Cabinet Secretary Fred Matiang'i, Insurance Regulatory Authority (IRA) CEO Sammy Makove and IRA web master Doreen Gitonga during the launch of the IRA website and Electronic Regulatory System (ERS) at the Hilton Hotel in Nairobi on January 8, 2014. PHOTO | DIANA NGILA  NATION MEDIA GROUP

In Summary

• The Electronic Regulatory System launched last week introduces a new risk-based supervision model to be monitored through technology
• It will force some of the insurance companies that have been struggling to maintain the required solvency ratios to either scale down or seek more capital

By MWANIKI WAHOME
More by this Author

The introduction of new technology in the regulation of Kenya’s insurance sector is expected to trigger a major realignment of the industry that currently has 46 registered companies.

The Electronic Regulatory System launched last week by the Insurance Regulatory Authority (IRA) introduces a new risk-based supervision model to be monitored through technology. (READ: Insurance regulator shifts to high-tech data system)

It will force some of the insurance companies that have been struggling to maintain the required solvency ratios to either scale down or seek more capital.

“The risks covered were on account of the minimum capital base, but now it will be based on solvency margins for every cover being undertaken. Those with a poorly performing portfolio will have to scale down on the risks covered or seek more capital to enable them to undertake the business,” Brian Akwir of the Association of Kenya Insurers said.

MEET FINANCIAL OBLIGATIONS

The companies will have to prove their ability to meet laid-down financial obligations, including payment of claims to clients, when underwriting risks.

The ERS system supplied by Vizor Ltd Consultants was acquired with the assistance of the World Bank’s Financial and Legal Sector Technical Assistance Project (FLSTAP) at a cost of Sh45 million, making Kenya the third country in Africa after Namibia and Ghana to adopt it.

“The system will improve data depth, consistency, quality and accessibility, to enable the authority achieve it’s dynamic model of supervision, which is in line with international standards,” IRA chief executive Sammy Makove said.

Cut-throat competition among the 46 companies has resulted in undercutting, particularly in the motor insurance business, affecting performance of the firms as they have to squeeze thin the margins from their deals.