Insurers in Kenya have been exempted from complying with capital requirements for six months as they face increased claims and receive less premiums during the COVID-19 pandemic.
This means that insurers who fail to meet the capital thresholds will not risk losing their operating licence according to a report from local newspaper Business Daily Africa citing a legal notice from the government.
Before the exemption, insurers were required to maintain a capital adequacy ratio of 100% at all times, taking into account multiple risks including underwriting, market, credit and operational.
Therefore, the short-term waiver is meant to give underwriters time to adjust to the challenging business environment – easing the pressure to raise more capital for those firms which were barely compliant.
The report noted that the pandemic had posed a challenge for insurers since mid-March. It has increased claims including from customers dying or hospitalised after contracting COVID-19.
This challenge has been compounded by difficulties in collecting premiums as individuals and businesses suffer reduced income in the wake of the pandemic.
The economic fallout resulting in the pandemic has led to job losses and pay cuts in the Kenyan economy. At the same time, businesses have also suffered reduced profitability and declining sales, resulting in defaults or slower payment of premiums for various insurance policies.
An insurance executive told Business Daily Africa that the Kenyan Insurance Regulatory Authority had asked insurers to accommodate customers finding it hard to pay their premiums.