Kenya Reinsurance Corporation (Kenya Re) has reported technical profits in most years in its non-life operations since initiating corrective actions in 2020, notes AM Best.
The global credit rating agency views Kenya Re’s operating performance as adequate, considering its return-on-equity ratio has moderately exceeded inflation levels in Kenya over the last five years.
The reinsurer reported an improvement in net/net combined ratio to 78.1% for 2024, as compared with 97.7% for 2023, as calculated by AM Best on an IFRS 17 basis. Overall earnings remain driven by favourable investment income, underpinned by high interest rates that are prevalent in Kenya.
AM Best has affirmed Kenya Re’s Financial Strength Rating of ’B’ (Fair) and the Long-Term Issuer Credit Rating of ‘bb+’ (Fair). The outlook of these credit ratings is stable.
Balance sheet strength
The ratings reflect Kenya Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and weak enterprise risk management.
Kenya Re’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio.
A key driver of capital consumption is Kenya Re’s exposure to illiquid investments, such as private equity and real estate, which together account for approximately one-third of its investment portfolio. The balance sheet strength assessment also considers Kenya Re’s exposure to very high levels of economic, political and financial system risks, which are associated with its core markets.
Kenya Re is a composite reinsurer operating a relatively well-diversified portfolio by line of business across Africa, Asia and Middle East. The company has privileged market access in Kenya, where it benefits from compulsory cession from domestic insurers.
Kenya Re’s risk management framework is evolving, says AM Best. Its risk management capabilities are weak when compared with its risk profile. AM Best notes that the company’s managing director was placed under suspension in September 2025, due to an ongoing internal matter. AM Best will continue to monitor the outcome of this matter.
Proposed increase in compulsory cessions
The government has proposed to increase to 25% the proportion of business that insurers are required to place with Kenya Re, up from the current 20%, under new draft regulations.
The CEO of the Insurance Regulatory Authority, Mr Godfrey Kiptum, in a notice, said, “The proposed amendments are intended to take effect on 1 January 2026 to apply to all treaty reinsurance contracts entered for the year 2026 and for subsequent years, until the Corporation is privatised.”
The National Treasury proposes the change under the draft Insurance (Amendment) Regulations, 2025, stating that the measure is intended to strengthen domestic reinsurance capacity and deepen market development. The draft amendment seeks to make this mandatory cession a permanent feature rather than a measure that must be renewed annually, as is currently the case. The increase will apply to both general and long-term insurance classes.
The Treasury expects that the higher cession rate could improve Kenya Re’s dividend capacity over time. Kenya Re is 60% owned by the Kenyan government.
The Treasury also expects little change in premium rates as 75% of reinsurance placement remains open to market competition.