What Changed and Why It Matters
A deep dive into IFRS 17, capital adequacy reforms, and consumer protection upgrades
Kenya’s insurance sector in 2025 is undergoing a regulatory transformation. With the full rollout of IFRS 17, stricter capital adequacy requirements, and enhanced consumer protection mechanisms, insurers are being pushed to become more transparent, resilient, and accountable. These changes are reshaping how insurance companies operate, report, and serve policyholders.
This guide breaks down the key reforms, their implications, and what they mean for insurers, investors, and everyday Kenyans.
1. IFRS 17 Rollout: A New Era of Transparency
What Is IFRS 17?
International Financial Reporting Standard 17 (IFRS 17) is a global accounting standard for insurance contracts. It replaced IFRS 4 and officially took effect in Kenya on January 1, 2023, with full adoption expected by mid-20252.
Key Changes
- Standardized contract valuation using risk-adjusted present value
- Separation of insurance service results from investment income
- Recognition of revenue over time, not upfront
- Grouping of contracts into portfolios based on risk and profitability
Impact on Kenyan Insurers
- Requires actuarial modeling, data upgrades, and system overhauls
- Enhances financial comparability across insurers
- Improves investor confidence and risk management
- Forces insurers to disclose onerous contracts and expected losses upfront
Adoption Status
As of June 2024, most general and life insurers had transitioned to IFRS 17. Early adopters include Britam, CIC, Liberty, and Jubilee Holdings, with restated 2022 results for comparability.
2. Capital Adequacy Reforms: Stronger Financial Foundations
Background
Kenya’s Insurance (Capital Adequacy) Guidelines, first issued in 2017 and revised in 2023, require insurers to maintain capital buffers based on their risk exposure3.
Key Requirements
- Minimum Capital:
- General insurers: KSh 600 million
- Life insurers: KSh 400 million
- Capital Adequacy Ratio (CAR):
- Must be at least 100% of minimum capital
- IRA enforces a 200% CAR under risk-based supervision
- Tiered Capital Structure:
- Tier 1: Paid-up shares, retained earnings, statutory reserves
- Tier 2: Preference shares, subordinated loans, revaluation reserves
- Risk-Based Capital Formula:
- Accounts for insurance, market, credit, and operational risks
Enforcement
As of June 2024, two life insurers and six general insurers had breached capital adequacy thresholds, triggering IRA intervention.
3. Consumer Protection Upgrades
Policyholders Compensation Fund (PCF)
- Established under the Policyholders Compensation Bill, passed in October 2024
- Activated in January 2025 to protect customers of failed insurers
- Offers payouts up to KSh 250,000 per claim
- Funded by 0.25% levy on premiums from insurers and policyholders
Licensing and Compliance
- IRA publishes monthly lists of licensed and delisted insurers
- Brokers must remit premiums within legal timelines
- Non-compliant firms face license revocation, as seen with 38 brokers delisted between 2022–2024
Digital Access and Transparency
- Insurers must offer real-time claims tracking, policy portals, and mobile onboarding
- IRA mandates clear disclosures on exclusions, limits, and complaint channels
4. Why These Changes Matter
| Stakeholder | Benefit |
|---|---|
| Consumers | More reliable insurers, faster claims, payout protection |
| Insurers | Stronger financial health, better risk pricing, investor trust |
| Investors | Transparent reporting, easier benchmarking, reduced volatility |
| Regulators | Early warning signals, smoother interventions, sector stability |
Final Thoughts
Kenya’s new insurance laws in 2025 are more than regulatory updates—they’re a blueprint for a transparent, resilient, and consumer-friendly insurance market. With IFRS 17 improving financial clarity, capital adequacy reforms strengthening solvency, and consumer protection laws safeguarding policyholders, the industry is poised for sustainable growth.
