About the Bill
The Insurance (Amendment) Bill, 2023 (National Assembly Bills No. 18 of 2023), sponsored by the National Assembly Leader of Majority Party, was published on 12th May, 2023. It was read for a first time on 25th July, 2023 and was then committed to the National Assembly’s Departmental Committee on Finance and National Planning.
Highlights of the Bill
According to the Bill’s memorandum of objects and reasons, the Bill has been submitted by the Cabinet Secretary for the National Treasury as part of the proposals for the Budget for 2023/2024.
The object of the Bill is to enhance accountability within insurance companies and observance of fiduciary duties as well as professional responsibilities by senior managers of insurance companies by amending the Insurance Act (Cap. 487) to provide for offences and penalties relating to the management of insurance companies.
The amendments will also ensure that insurance companies take responsibility in case an insurance company fails.
The Bill contains 5 clauses.
Clause 2 seeks to amend section 40 of the Insurance Act by deleting the proviso to subsection (1). Section 40(1) provides as follows-
40. Increase of deposit
(1) Where upon examination of a return, reinsurance document or other document of or furnished by an insurer, it appears to the Commissioner that a deposit made under section 32, or the value of the assets of the insurer in Kenya, is disproportionately low in relation to the amount of insurance business carried on by that insurer in Kenya, or that it is in the opinion of the Commissioner desirable for the protection of policy-holders, the Commissioner may, after giving the insurer a reasonable opportunity of making representations, require the insurer to make an additional deposit of such sum as he shall specify not exceeding in the case of general insurance business twenty per cent, and in the case of long term insurance business ten per cent, of the premiums paid or payable in respect of policies of insurance issued in the financial year of the insurer immediately preceding the year in which the additional deposit is required to be made:
Provided that the total deposits including the additional deposit shall not exceed three million shillings in the case of general insurance business and three million shillings in the case of long term insurance business.
Clause 3 of the Bill seeks to insert a new section 67G providing for offences relating to the management of an insurer. It provides as follows-
67H. (1) Any shareholder, director, principal officer or management staff of an insurer who-
(a) fails to take all reasonable steps to secure the compliance of a registered or licensed person with this Act;
(b) fails to take all reasonable steps to secure the accuracy and correctness of any statement or report submitted under this Act or any other applicable written law;
(c) fails to supply any information required or effect any directive issued under this Act;
(d) fails, without lawful justification, to settle a judgment or any claim under this Act; or
(e) without claim of right takes or converts any property of the insurer to his or her personal or associate’s use or gain, including-
(i) permanently depriving the insurer of the property;
(ii) using the property as a pledge or security;
(iii) receiving the insurer’s property and failing to remit or reasonably account to the insurer; or
(iv) dealing with the property of an insurer in such a manner that it cannot be returned in the condition in which it was at the time of the taking or conversion,
commits an offence under this Act.
(2) A person who commits an offence under this section shall be liable on conviction-
(a) on a first offence-
(i) in the case of an individual, to a fine not exceeding five million shillings or to imprisonment for a term not exceeding two years; or
(ii) in the case of a company, to a fine not exceeding ten million shillings; and
(b) on any subsequent offence-
(i) in the case of an individual, to a fine not exceeding ten million shillings or to imprisonment for a term not exceeding five years; or
(ii) in the case of a company, to a fine not exceeding thirty million shillings.
(3) The court may make an order for the payment by the person convicted of an offence under this section of compensation to a person who suffered loss by reason of the offence.
(4) An order under subsection (3) may in addition to or in substitution of any other penalty or remedy available to that person.
(5) The amount of compensation under subsection (3) shall be-
(a) the loss sustained or adverse suffered by the person claiming compensation; or
(b) the profits that have accrued to the person liable to pay the compensation.
Clause 4 of the Bill seeks to amend section 70 of the Insurance Act by deleting the word “advisory” appearing in subsection (2). Section 70 of the Act is reproduced below together with the visual representation of the amendment.
70. Limitation of management expenses
(1) No insurer shall spend in any financial year as expenses of management an amount in excess of the prescribed limits, and in prescribing those limits regard shall be had to the size and age of the insurer and the provision generally made for management expenses in the premium rates of insurers.
(2) The Commissioner may, in any year, after consultation with the Advisory Board, fix for the succeeding year the extent to which the limits prescribed in regulations may be relaxed, and an insurer shall not be deemed to have contravened the provisions of subsection (1) if his expenses of management referred to in that subsection are within those, relaxed limits.
The definition “Advisory Board” was deleted by section 2 (a) of the Insurance (Amendment) Act, 2006. Section 3B of the Insurance Act provides for the establishment of Board of Directors of the Insurance Regulatory Authority. Further, section 2 of the Insurance Act defines “Board” to mean the Board of Directors of the Authority constituted under section 3B.
Clause 5 of the Bill seeks to amend section 150 of the Insurance Act in the marginal note by deleting the word “surveyors” and substituting it with the words “insurance surveyor”. Section 150 of the principal Act provides as follows-
150. Only registered brokers, agents, risk managers, motor assessors, insurance investigator, loss adjusters, surveyors, medical insurance provider and claims setting agents to carry on business
(1) No person shall, after the expiry of three months from the appointed date, commence, transact or carry on in Kenya the business of a broker, agent, risk manager, motor assessor, insurance investigator, loss adjuster, insurance surveyor, medical insurance provider, or claims settling agent unless he is registered under this Act.
(2) No person shall, after the expiry of three months from the appointed date, use the name of broker, agent, risk manager, motor assessor, insurance investigator, loss adjuster, insurance surveyor, medical insurance provider or claims settling agent in a manner to give the impression that he is registered to commence, transact or carry on any such business, unless he is so registered.
(3) Nothing in this Act shall prohibit or otherwise render unlawful the continuance of the business of a risk manager, motor assessor, insurance investigator, loss adjuster, insurance surveyor, medical insurance provider or claims settling agent in Kenya in so far as it is necessary to complete any assignment which was undertaken before the appointed date.
(4) A person who contravenes the provisions of this section shall be guilty of an offence and liable to a fine not exceeding fifty thousand shillings and, if the offence is a continuing one, to a further fine not exceeding one thousand shilling for every day during which the offence continues or to imprisonment for a term not exceeding one month or both.
The amendment seeks to clean up the marginal note which refers to “surveyor” yet subsections (1), (2) and (3) of section 150 refers to “insurance surveyor”.
How do you submit your views?
The Bill has been committed to the Departmental Committee on Finance and National Planning which is considering it and will table its report. Pursuant to standing order 127(3) of the National Assembly Standing Orders, the Committee shall facilitate public participation and shall take into account the views and recommendations of the public when the committee considers the Bill.
In addition, pursuant to standing order 127(4) of the National Assembly Standing Orders, the Committee is required to submit its report to the House within thirty calendar days of the committal of the Bill to the Committee.
Members of the public may submit any comments on the Bill to the Office of the Clerk of the National Assembly, 1st Floor, Main Parliament Buildings, Nairobi, Kenya, through P.O. Box 41842-00100, Nairobi, Kenya or email cna@parliament.go.ke.
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