The National Treasury has announced plans to strengthen Kenya Reinsurance Corporation (Kenya Re), by increasing its share of the local reinsurance market. Through the proposed Insurance (Amendment) Regulations 2025, the Treasury seeks to raise the mandatory cession rate that local insurers must reinsure with Kenya Re by 5.0% points to 25.0 % from 20.0%. This means that insurance companies operating in Kenya will now be required to place a quarter of their reinsured business with Kenya Re.
The new regulations also propose to make this arrangement permanent rather than subject to annual renewal. This change is intended to provide Kenya Re with a stable and predictable stream of income, allowing it to plan more effectively, grow its capital base, and increase its ability to handle large insurance claims. By doing so, the government hopes to make the company stronger and more competitive, not just locally but also across the region.
The Treasury has explained that the move is part of a broader strategy to retain more reinsurance premiums within the country. Currently, a significant portion of reinsurance business in Kenya is placed with foreign reinsurers, which leads to an outflow of foreign currency. By ensuring that a larger share of premiums remains in Kenya, the government hopes to conserve foreign exchange and stimulate domestic economic growth.
A stronger Kenya Re is also expected to make the local insurance industry more resilient and self-sufficient. When faced with large-scale claims, local insurers often rely on foreign reinsurers to provide financial support. By empowering Kenya Re, the country will have a more reliable local partner capable of handling big claims, thus improving the overall stability of the financial system.
Additionally, the Treasury believes that strengthening Kenya Re could make it more attractive for partial privatization in the future. If the company becomes more profitable and financially sound, the government could consider selling a portion of its stake to private investors, which would raise capital for national development while maintaining local ownership of a strategic asset.
Despite the potential benefits, the proposal has generated mixed reactions from industry players. Some insurers support the move, saying it will help build local capacity and strengthen the domestic market. However, others argue that increasing the mandatory cession rate reduces competition and limits their freedom to choose reinsurers that offer better terms or specialized expertise. There are also concerns that guaranteeing Kenya Re a fixed share of the market could make it less competitive over time.
To address these concerns, the draft regulations require Kenya Re to accept ceded business on terms no less favorable than those offered by other reinsurers. This condition aims to ensure that the company remains efficient and fair while benefiting from the increased cession.
