Kenya set to unveil new regulations on Islamic insurance

Insurance industry players are preparing for the introduction of new regulations on Islamic-based insurance or Takaful in Kenya by end of the year.

However, the long-awaited establishment of the new law which seeks to provide licensing and regulation of Takaful insurance business to attract foreign investment in the sector, is still subject to a tedious regulatory and Sharia’h process by National treasury, even though the industry regulator –Insurance Regulatory Authority (IRA) is optimistic that the regulation will be ready before 2019.

“The draft is ready, and all stakeholders involved are okay with the recommendations and proposals on the regulation. We are now ready to present it to the Treasury Cabinet Secretary Henry Rotich for endorsement. With the law in place stakeholders will now be able to do business with certainty,” said IRA’s Manager, Supervision Kalai Musee.

Takaful and Retakaful business is seen as essential to building a participatory financial ecosystem in the country as Kenya positions itself as an Islamic financial hub in the region.

The new development follows the enactment of the Insurance (Amendment) Act of 2016 which came to force in January 1, 2017 but had faced numerous conflicts from stakeholders involving the law or Sharia’h compliance as well as lack of the model’s ‘acceptance’ by regulatory bodies, prompting delay in its launch.

In July last year for instance, the Capital Markets Authority (CMA) sharply differed with a report published by International Monetary Fund (IMF) which had indicated that Kenya’s Islamic finance market lacks sound regulatory framework. The capital markets regulator instead jumped into the defense of the country’s efforts citing recent developments such as adjustments by the Treasury as well as the amendment of Capital Markets Act among others.

Still, sources say that professionals in the sector were confident that there would be an effective start to a new era to Takaful and Retakaful business before the year closes.

“We believe that the hard task is behind us now that general conditions have already been validated by professionals,” said Mohammed Badamana, the Chairman of Shari’ah Supervisory Board.

If allowed to pass the regulatory checks and balance, experts believe that the law could immensely open the country’s financial market in its pursuant in consolidating the industry to challenge the dominance of conventional banks as well as boost efforts by the State in the issuance of Islamic bonds or Sukuks and further boost insurance penetration levels currently below 3 per cent.

“There are still challenges. Need for consolidations, commitments and capitalization could boost this nascent industry,” according to Hassan Bashir, the Chief executive of Takaful Africa.

They were speaking during the second Retakaful conference being organized by Kenya Reinsurance.

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-Takaful is a mutual insurance concept that abide with Islamic rules, and precludes a takaful insurer from earning interest on its investments.

-The wakalah model which is popular, allows operators to charge a management fee to cover expenses as well as cost of capital in addition to taking share of investment returns.

-About 3 undisclosed firms have already applied to IRA to be allowed to offer Takaful business in the country