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April 2013

A WORD FROM THE EXECUTIVE DIRECTOR

“AKI conceptualised the need for a Political and

Terrorism Market Pool.”

In August 1998, Kenya experienced the first terrorist attack that decimated the entire American Embassy Building, caused massive damage to the surrounding buildings and injured hundreds of people, most of them fatally. At the close of 2007 and beginning of 2008, the country

experienced the most devastating post election violence. The violence left behind a trail of damage and theft of property through looting, injury and death to over one thousand Kenyans.

In the above two instances, Kenyan Insurers found themselves ill equipped to provide compensation to the victims, purely because they had not provided these people and others with the requisite insurance covers. It was therefore, a wake up call for most Insurance Companies.

Immediately thereafter, a number of insurance companies crafted insurance policies to provide terrorism and political risks cover, from around 2009. To be able to provide this cover, Insurers had to seek reinsurance protection from reinsurance companies. This protection would ordinarily come at a cost. To save members from the expensive reinsurance covers, AKI conceptualised the need for a Political and Terrorism Market Pool. In 2010, the process of securing reinsurance protection for the Pool commenced. It was not until 2012 that the local reinsurance companies agreed to provide a limited cover of upto one billion Kenya Shillings. All the other terms were agreed upon.

The cover was to start from 1st January 2013 to ensure that the election period was well within the cover period. However, by the time all aspects of the cover were agreed on, it was well beyond the month of November, the month that Insurers renew their reinsurance treaties. Marketing of the Market Pool was therefore hampered by this logistical hiccup. We were not able to get enough members to subscribe to the Pool as this would have resulted in double reinsurance for a number of companies. The exercise has therefore been put on hold until sometime later in the year. The need for a Market Pool remains very relevant and necessary.

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GENERAL INSURANCE UPDATE

A. Property & Engineering

i) Enhanced sums insured for listed risksFollowing the last GIC meeting, the Secretariat wrote to IRA requesting for the Listed Risks thresholds to be enhanced as:

• Fire (any one location) – Ksh.1Billion• CAR-Roads – Ksh. 1 Billion• Other Engineering classes – Ksh.500

million.

ii) Oil and Energy Workshop

The Secretariat and JB Boda jointly organised Oil and Energy Workshop from 14th-15th February 2013 at Boma Hotel, Nairobi. The seminar was attended by 46 participants drawn from member insurance companies and two participants from IRA. JB Boda had two representatives; they were accompanied by an expert from Hannover Re. and GIC-Re. (India). At the end of the session, participants were issued with evaluation forms for feedback.

The following papers were presented:

Day One:• Oil & Energy Sector – An overview • Global Oil & Energy Sector • Onshore Energy – [Technical

Perspective] • Onshore Energy – [Insurance

Perspective] Underwriting Considerations, Package Policy including OEE & Third Party Liabilities

• Offshore Energy – Exploration Phase: [Technical Perspective]

• Offshore Energy (Insurance perspective & Operational covers)

• Construction Phase [Technical Perspective]

• Construction Phase [Insurance Perspective]

• Production Phase: Development drilling, Well completion, Well servicing and Workover (Fixed Structures & Assets)

• Transportation Phase: Transportation of product by Subsea Pipeline Transportation by Tankers

Day Two:• Offshore Energy – Exploration Phase:

[Insurance Perspective] • Control of Well Insurance Blowout –

Evolution of coverage • Business Interruption, Delay in Start-

up [DSU] and Loss of Hire • Liabilities & Pollution coverage.• Claims • Reinsurance challenges -

Underwriting Considerations, Reinsurance Protection, Methods of Reinsurance

• Reinsurance-Views of Another Reinsurer

The workshop was useful to the participants and they request more workshops. Letter was done to the

Chairman of JB Boda thanking him and his team for the workshop.

B. Accident Technical Committee.

(i) Public and Product liability InsurancesIRA invited the industry stakeholders to a one day workshop at the College of Insurance to critique the draft Product, Public, Fidelity Guarantee and Money Fidelity and Money policies. The views of the industry will be incorporated in the final documents.

Participants who attended the Oil & Energy Risks Workshop at Red Court Hotel

33

GENERAL INSURANCE UPDATEThe Accident Technical Committee has constituted a working group to come up with Public and Products Liability insurances underwriting guidelines.

(ii) Impact Assessment of Occupational Safety and Health (OSH) Workshops.The Committee requested for a budget to establish the impact of the four regional workshops held in Nairobi, Nakuru, Mombasa and Eldoret. The Secretariat drafted terms of reference for the study and shared the same with the Accident Technical Committee members. The same will be forwarded to research firms to enable them come up with proposals. The objective is to engage the insureds who attended the workshops and find out if the workshops assisted them to improve their work place risks in accordance with OSHA requirements

The Ministry of Labour has come up with a Work Injury Compensation Bill 2013. The Statutory and Legal Affairs Committee discussed the Bill recommended that research be conducted in other jurisdictions to enable AKI develop a position paper on the draft Bill. C. Marine & Aviation Technical Committee

(i) Aviation Policy, Air Balloon Proposal Form and Policy documentThe Committee is working on Hot Air Balloon policy document. The Air Balloon proposal form was finalised.

(ii) Workshop for Boats /Vessel owners along the Coastal Strip.The Secretariat has requested Kenya Maritime Authority to partner with us in mobilising owners of boats and small vessels at the coast for a workshop in the second quarter. The workshop is intended to sensitise the stakeholders on the marine risks and also enlighten them

on the requirements of the Legal Notice requiring them to insure all vessels plying Kenyan waters.

iii) Marine Cargo Surveillance SchemeQuarterly reports continue to be received from the Scheme Managers. The marine committee noted an improvement on the reports and usage of the scheme. The scheme managers have directly contacted marine managers of companies that have not been using the scheme adequately and taken them through the online submission of inspection requests.The results have been positive.

D. Motor Technical Committee.

(i). Road Safety CampaignsThe Easter road safety campaign is going on in radio citizen. The focus is on motor vehicle drivers and motor cycle riders. The campaign will end on 27th April 2013. Members are encouraged to listen to this campaign and give their feedback.Royal Media had pledged to sponsor Ksh. 1 million airtime. In addition to the radio, we will therefore run some visual clips on citizen TV using this sponsorship.

(iii). Fake Motor Antitheft DevicesThe Committee noted with concern that some of the motor anti-theft gadgets are not functioning. In this regard, the Secretariat wrote to KEBS in November 2012 asking for a list of tested and approved antitheft devices and providers. KEBS has not responded yet. The Convenor of the Motor Technical Committee is following the matter KEBS.

(iv). Motor Technical SeminarThe seminar was held on 27th March 2013, at the Sarova Panafric hotel. The areas coverered were motor underwriting guidelines, COMESA Yellow Card Scheme and the Knock- For- Knock Agreement. The presentations were forwarded to the participants with a

request that they share with the rest of the staff members.

(v). Disposal of SalvagesSome members have complained that KRA is approaching them to pay VAT on sale of salvages. They are also invading auction yards where the members are selling salvage vehicles. AKI has engaged its tax consultants to advice on the matter.

D. Medical Technical Committee. (i) Workshop for Matrons and Care ManagersThe Committee intends to organise a workshop for hospital matrons and care managers in Nairobi. The same is aimed at improving service delivery and will be carried out in the second quarter.

(ii) Mental Care Health Bill 2012The Committee is reviewing the provisions of the Mental Health Care Bill. The main concern is the proposal to include persons with impairment as a result of alcohol, drugs or substance abuse to be covered under medical policies. This is an exclusion in all medical policies in this market. The committee will give its proposals on Bill.

(iii) Fraud survey There is need to establish the extent of fraud in health insurance in order to come up with strategies of minimizing the same. The committee will carry out a survey in the second quarter.

E. Motor Pool Winding UpThe Motor Pool Annual General Meeting was held on 13th March 2013. The main highlights were:

• The Audited Accounts for the year ended 30th September 2012 were adopted.

• Deloitte & Touche was reappointed as the auditors.

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LIFE INSURANCE UPDATE

4

Life Business Division

1. AKI AGENTS OF THE YEAR AWARD (AAYA 2012)

The AAYA Event took place on 22nd February 2013. The theme of this year’s event was; ‘Setting the pace: Transforming Life Insurance’. The AKI Agents of the Year Award Event celebrated the 10th Anniversary. The main objective of the event is to recognize the exemplary performance of the top life agents in the industry and to motivate them to achieve greater productivity and improve on the volume and quality of business sold, thus enhancing the growth of the life insurance sector.

The AAYA Event has experienced exponential growth over the last 10 years since 2002 when it was started. The number of qualifying Agents has grown from 63 agents in 2002 to 418 agents in 2012. A growth of 563%. The total number of policies sold has grown from 3871 policies in 2002 to 23,525 in 2012. A growth of 508%. The total API sold by the qualifiers has grown from 122.8 million in 2002 to 1.4 billion in 2012. A growth of 1040%.

For the first time AKI has also incorporated the group Life best Practice Award. The aim is to award Life insurance companies which practice good business practice and embrace innovation.

The event comprised three events as follows:-

i) CEO’s Forum; this was held at the Serena Hotel and the guest speaker was Mr. Jonathan Ciano. He presented the topic; Business Turn around for Transformational growth. All the CEO’s of member companies were invited.

ii) Agents Forum; this was held at Safari Park Hotel and was attended by 416 qualifying agents. The Forum was very successful and included a team building session.

iii) Dinner Awards Ceremony; this was held at the Safari Park Hotel. The guest of honor was Mr. Chris Kirubi whose speech resonated very well with the audience. For the first time, the event incorporated a new category, The Group Life Best Practice Award. The Dinner Event was very successful and was attended by 863 guests.

Four hundred and Eighteen (418) agents met the minimum qualifying criteria set by

COMPANY NUMBER OF QUALIFIERS

British American Insurance Company 145CFC Life Assurance Limited 54Co-operative Insurance Company Ltd 7Corporate Insurance Company Ltd 12ICEA Lion Life Assurance 51Jubilee Insurance Company Ltd 40Kenindia Assurance Company Ltd 10Madison Insurance Company Ltd 11Old Mutual Life Assurance Company Ltd 8Pan African Life Assurance Ltd 57Pioneer Assurance Company Ltd 20UAP Life Assurance Company Ltd 2TOTAL 417

British-American Insurance Company (K) Ltd CEO, Mr. S. Wandera (right) and Mr. Joseph Gathogo the Country Sales Manager (Life) express their joy at being awarded the AAYA Company of the Year Award for the sixth consecutive year.

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LIFE INSURANCE UPDATE

5

the Association. The number of life insurance agents per company who qualified is shown in the table. Congratulations to all the Winners!

2.MORTALITY REVIEW EXERCISE

The review exercise has already started. The Actuarial firm is currently

reviewing the data.The initial study covered the period 2001 to 2003. While the study was a great success, the three year period covered by the study is too short. AKI would like to carry out a review of the mortality tables to cover the period 2004 to 2010.

The Secretariat undertook the data collection exercise for the period 2004 to 2010. The exercise covers four classes of business namely; Ordinary Life, Group Life, Annuities and Morbidity.

3.RESEARCH ON YOUTH NEEDS ASSESSMENT

AKI commissioned SBO Research to carry out a survey whose main objective is to investigate the perception of the youth in regards to the Insurance Industry, their expectations, their unmet needs, desired product features and their desired distribution channels. The target group is the youth

aged 20 to 35 years old. A dissemination breakfast meeting was held at the Crowne Plaza Hotel on 15th March 2012 and was well attended by 68 members, mainly CEO’s and Business Development Managers.

Specific Objectives of the Survey

• Investigate how the Kenyan Youth perceive Insurance

• Review the current life insurance products and whether they meet the needs of the youth

• Establish whether the youth are using Life Insurance services

• Investigate the gaps in meeting the needs of the youth where life insurance is concerned

• Establish the main challenges/ obstacles in facing the youth preventing uptake of Life Insurance

• Establish if there is a need in the market for Insurance youth products and features of interest

• Establish product enhancements that youth would like to see on Life Insurance

• Make recommendations for strategies that the industry can use in developing youth products and positioning the same.

Suggested Recommendations;

• Need for consumer education and demystification of insurance among the younger generation

• Affordable products with an option of irregular premium payments since majority have limited and irregular income.

• Simplify life insurance products and communicate the risks covered and conditions clearly.

• Targeted sales; place and method of reaching the young generation

• More appealing adverts. Formal adverts mainly appeal to the mature crowds.

• Create awareness using social media, road shows, radio fliers, etc

• The industry should connect more with the youth. Engage in activities that involve the younger generation e g sponsor sports activities, entertainment activities, talent shows, etc.

Lucy K. Muchira of British-American Insurance Company (K) Ltd is awarded for being the overall winner in the AAYA New Business Production Award

Kellen N. Kariuki of British-American Insurance Company (K) Ltd is presented with an award for attaining Position No. 1 in the AAYA Persistency Award.

Pan Africa Life Assurance celebrate after being awarded overall winners of the Inaugural Group Life Best Practice Award

Agents engage in team building during the Agents Forum.

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PUBLIC RELATIONS UPDATE

1. AKI Journal and Bulletin The AKI journal and bulletin are important channels of communication for the Secretariat. The Journal is published bi-annually in June and December while the bulletin is published quarterly. It was ten years in December 2012 since the first issue of the journal was published. The team settled for the theme “The Journal at Ten: Tracing Our Steps”. The December 2012 journal was

circulated in February 2013.The journal team has started working on the June 2013 issue.

2. Public Education Campaigns

2.1 Life Insurance CampaignThe Life Insurance Public Education Radio Campaign was aired on Classic Fm (English) and Q Fm (Swahili). The campaign started on 2nd January 2013 and ended on 4th February 2013. Both Classic and Q Fm Stations have good ratings, nationwide listenership across both genders. They have a strong following among the age group of 24- 35 which was our target market.

2.2 General Insurance Campaign.This year’s general insurance public education campaign will be carried out in the second quarter.

THE

The Journal at

INSIDE:• Riskmanagementandprofitability• Brandpersonification

• Discardingsecrecyforliveliness• Customersatisfaction

Celebrating the Milestones

VOL 8 No. 7

December 2012

THE

The Journal at

INSIDE:• Riskmanagementandprofitability• Brandpersonification

• Discardingsecrecyforliveliness• Customersatisfaction

Celebrating the Milestones

VOL 8 No. 7

December 2012

3. Insurance Village The Secretariat has started organising the third ‘Insurance Village” which will take place during the Nairobi International Trade Fair to be held on Sept 30th - 6th Oct 2013. AKI has reserved a space at the ASK Show Ground. We welcome Insurance Companies and stakeholders to exhibit their products and services to the public for one week. AKI shall partner with hospitals to offer for free medical checkups.

4. Media Reporters Training.The Secretariat will be organising a training for media reporters in the second quarter. The objective is to train journalists to give them a better understanding of insurance. PR Consultants will be requested to prepare a proposal on how the training can be conducted.

5. Insurers Sports Day.Nyayo National Stadium has been booked for this year’s Sports Day. A number of members have confirmed participation.

AKI held its Annual General Meeting on 28th March 2012 at AKI Centre, Mimosa Road, Muchai Drive, Off Ngong Road. During the Annual General Meeting, election for three members of the Board

who will also serve in the Life Insurance Council was held. The following were duly elected to fill the three vacancies:-

1. Mr. Abel Munda – CEO, CFC Life Assurance Ltd

2. Mr. Justus Mutiga – CEO, ICEA Lion Life Assurance Ltd

3. Mr. Tavaziva Madzinga – CEO, Old Mutual Life Assurance Ltd

AKI ANNUAL GENERAL MEETING

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1. Meeting with the Judges and Magistrates Vetting Board

The Judges and Magistrates Vetting Board wrote requesting for a meeting with representatives from insurance companies to share their experiences on the conduct of matters by various Judges and Magistrates related to Insurance Business. To effectively undertake its assignment, the Board is given powers under Section 14(1)(g) of the Vetting of Judges and Magistrates Act, 2011 to gather and compel production of information from any source including government authorities.

The Board noted that insurance companies were indeed major stakeholders in the process of the ongoing judicial reforms and their

input was considered valuable. The meeting held between representatives of insurance companies and the vetting Board held on 23rd January, 2013 was well attended.

2. Review of the Insurance Act, Cap 487

The IRA is in the process of identifying a consultant with relevant experience and expertise in risk based supervision to assist in drafting the new Insurance Bill, 2013.

3. Workshop on the Unclaimed Financial Assets Act, 2011

A workshop on the Unclaimed Financial Assets Act, 2011 was successfully held at the Hilton Hotel on 23rd January, 2013. The facilitators were drawn from

the Unclaimed Property Assets Register (K) Ltd as well as Trifecta Capital, an organization based in South Africa which is seeking to establish local presence in Kenya. Members of the Board of the Unclaimed Financial Assets Authority were also in attendance at the workshop. The insurance industry was well represented at the workshop.

4. Budget Proposals 2013/2014

The Budget proposals for the year 2013 /2014 have been prepared and forwarded to Treasury and the Insurance Regulatory Authority.

5. IRA Guidelines

The guidelines released late last year in October 2012 by IRA touching on Risk Management, Reinsurance, Actuarial

LEGAL DEPARTMENT UPDATES

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LEGAL DEPARTMENT UPDATES

THE ASSOCIATION OF KENYA INSURERS AKI Centre, Mimosa Road, Mucai Drive, Off Ngong Road •, P.O Box 45338 - 00100 NAIROBI

Tel: 254 20 2731330/1/2/3, 020-2599718 • Fax: 254 20 2731339 • E-mail: info@akinsure.com • Website: http://www.akinsure.com

and Audit Function took effect on 1st March, 2013.

IRA has released three (3) new guidelines to members at a stakeholders exposure workshop held at the College of Insurance on 27th February, 2013. The guidelines touch on Insurance Risks, Suitability of persons involved in the ownership, stewardship and management of insurers as well as Technical Liability Valuation for General Insurers. The Secretariat has dispatched AKI Circular No 36 requesting for comments or concerns from members on the guidelines.

6. The Finance Act 2012

The Finance Act, 2012 has now been released. The Secretariat has sent out a circular to members highlighting amendments to the Insurance Act, Cap 487 vide AKI Circular no 20/2013 as follows:-

• Section 2 of the Insurance Act, Cap 487 is now amended to allow the Authority to assess the suitability of a significant owner. This will give the IRA power to carry out an assessment of the professional, financial and moral suitability (integrity test) for persons managing, controlling or having a significant ownership or significant beneficial interest in a person licensed under this Act.

• Under Section 3A the Authority has additional power to “conduct inquiries” in furtherance of its supervisory role.

• Under Section 9 of the Act, the Authority has power to conduct an investigation into any matter once it

receives such a request from another Regulatory Authority.

• The Amendment to Section 54 of the Insurance Act, Cap 487 now requires all Insurers to prepare and remit their quarterly returns within thirty (30) days at the end of each quarter as opposed to forty five (45) days previously.

• The Finance Act, 2012 has amended the Banking Act Cap 488 to cater for the introduction of new concepts such as bancassurance, agency banking etc by amending the definition of “banking business” to insert a new paragraph “(d) Such other business activity as the central bank may prescribe”. This will widen the distribution channels in the financial services sector.

• Section 13 of the Banking Act was amended to introduce the concept of a non operating holding company.

5. Petitions to Parliament Act, 2012

Parliament has passed the Petitions to Parliament Act, 2012 which allows for petitions to be made to parliament and the county assemblies to be established under the new constitutional dispensation. The petition will be forwarded to parliament or the county assembly addressed to the clerk of the national assembly/county assembly. All petitions must clearly state the type of intervention sought and contain relevant details such as name, address, ID number of the applicant. This will facilitate dialogue in a structured manner with both parliament and county assemblies.

6. The Public Private Partnership (PPP) Act, 2012 The principal object of this Act is to provide an institutional and regulatory framework for carrying out public private partnerships in Kenya. It regulates the process of engagement of private parties and the manner in which public private partnerships are conducted so as to ensure the provision of high quality services. The new law will now provide a legal framework that will guide public private partnerships so as to reduce misunderstandings that give rise to risks of litigation that can be encountered in Project implementation.

These arrangements between government and private sector will provide a conducive environment for greater investment and efficiency in the delivery of services to the public. The two parties will share the risks, rewards and responsibilities and the engagement between two parties may take many forms such as concessions, service contracts, management contracts, joint ventures, franchises etc. Since these projects require massive funding private sector resources and expertise will be most beneficial.

Insurers will be at the forefront in the provision of insurance cover for the PPP development projects that Government is expected to enter into with private sector on a large scale. The types of insurance to be taken out on the project and the risks of its operation or utilization, executive warranties issued in favour of the contracting authority, and provisions and procedures for their release will be crucial in that case.