Pre-independence legislation

Modern insurance came with colonial administration; the legislation was racist as it demonstrated a deliberate move by the colonial government to keep Africans out of the monetary economy.  The first legislation instrument governing insurance was enacted in 1945 and was in the form of a statute.  It restricted the sale of insurance to Europeans only arguing that Africans did not appreciate the services of insurance.  In 1947 a second legislative instrument was enacted referred to as the African life control ordinance.  It stated that the Africans could only buy insurance with approval of the governor in council.  In 1960, the first wide ranging legislation was enacted called insurance company ordinance (Cap 487).  The reasons that led to its enactment were:

  • There was a rapid increase in number of insurance company in Kenya.
  • There was also a reasonable economic growth in the country.


It was a reproduction of the British laws governing insurance.  It lacked tight control on insurance company as compared to the British situation, although it was the first comprehensive legislation.  It did not have the interest of African at heart.


Post Independence

In the attainment of independence, the government decided to nationalize insurance and allowed it to operate in the private sector, but there was need for legislation to regulate activities of insurance company, because:

  • Discriminatory and unfair legislation enacted before
  • Economic and social development attained by Kenya.
  • Insurance generated a lot of money that needed protection and control.
  • There was a growing need for citizens to buy insurance.


In 1962, 1960 ordinance was amended, giving access to insurance facilities by all the locals.  In 1964, the Kenya Government formed the first local insurance company by the name Kenya National Insurance Company officially closed on 13th July 1996 following a budget proposal on June 1996.  In 1970 the state re-insurance act was enacted that brought into existence the Kenya Reinsurance Corporation.  In 1973, it was revised and called the Kenya Reinsurance Corporation Act.


Since insurance involves taking money from members public, who thereby become policyholders in return for promise of payment, some unscrupulous persons collected premiums and diverted them without bothering to honor their promises.  This was the situation in Kenya in the late 1970s and early 1980s as insurance companies could start their operations after being registered by the Registrar of companies.  This made the public to loose faith in the insurance companies.  In 1984, Kenya Government passed the insurance Act (Cap.487) and came into force in 1987 with the following objectives.


Objectives of Regulating Insurance Services in Kenya

  1. Protecting the interest of the policyholders, the insurance company must maintain sufficient reserves to meet their obligations.
  2. Building up and developing the local insurance market by shielding the local insurer from foreign insurance.
  3. Ensuring that insurers in Kenya must be incorporated under the Companies Act and that Kenyan citizens hold a third of the controlling interests in the company.
  4. Developing local insurance expertise. This is being achieved through training, e.g. teaching insurance courses in the institution of higher learning and the opening of the College of Insurance in 1991.
  5. Ensuring that funds generated by insurance operations are channeled into the local market.
  6. Develop a policy framework with regard to insurance economic and social development of the country.


The Insurance Regulatory Authority
 Previously referred to as the office of Commissioner of Insurance is in charge of regulating Insurance activities in the country> The following are the duties of a Commissioner include:

  • Enforce the provision of the insurance Act.
  • Formulate and enforce standard for conduct of the insurance business.
  • Direct insurers and re-insurers on the standardization of contracts of insurance.
  • Approve tariffs and rates of insurance in respect of any class or classes of insurance.
  • Licenses all members of the industry annually and can revoke their licenses.
  • Ensuring that the insurers deliver the promised benefits and that the company is being properly managed to meet its future liabilities as they fall due.
  • Ensure that an insurer invests their assets prudently and adopt a positive attitude towards its obligation to policy holders and claimants.
  • Ensure that Insurance companies maintain deposits in government securities with Central Bank of Kenya for certain amounts and for specific line of business. This can be used to offset an insurer’s debt to policyholders if the insurer goes into liquidation.
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