23 Insurance Companies Risk Closure Over Inability to Pay Claims

The Insurance Regulatory Authority (IRA) has revealed that 23 insurance companies in Kenya ended the 2023 financial year with insufficient capital, raising concerns over their ability to meet obligations, including paying claims. According to The Business Daily, these 23 insurers had a combined capital shortfall of Ksh32.2 billion, breaching the minimum capital requirements set by the IRA. The Insurance Act mandates insurers to maintain adequate capital levels to cover risks, but several insurers have significant negative capital. This raises concerns about the stability of the sector, with some insurers also facing penalties for late claims settlement and other breaches. Despite these issues, the IRA continues to push for compliance to ensure market stability. 

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In a report by Capital News, President William Ruto has announced plans to extend the Standard Gauge Railway (SGR) from Naivasha to Uganda, Rwanda, and the Democratic Republic of Congo (DRC) to promote regional trade and connectivity. Speaking during the East Africa Community Inter-Parliamentary Games in Mombasa, Ruto said the project would enhance cross-border transport and economic integration within the East African Community. Uganda has already launched construction of its SGR, starting with a 272km section from Malaba to Kampala, expected to be completed in four years. The extension is also aligned with efforts to boost intra-regional trade and support the proposed African Continental Free Trade Area (AfCFTA). 

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Commercial banks are under pressure from the Central Bank of Kenya (CBK) to lower lending rates, which rose to 17.15% in October, despite the CBK reducing its policy rate to 11.25%. The Business Daily reports that CBK Governor Kamau Thugge criticised banks for delaying rate reductions after benefiting from previous hikes, which quickly boosted rates. The lending-profit gap hit a 31-month high, with banks citing high deposit costs and competition with government securities as barriers to reducing rates. Private sector credit growth stalled at zero in October, raising concerns about the impact of costly loans on economic activity. Meanwhile, banks posted Ksh225.3 billion pre-tax profit in 10 months, up 12.9% from last year. 

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Public universities in Kenya are grappling with corruption, debt, and mismanagement, pushing some to the brink of collapse, as reported by The Standard. The Ethics and Anti-Corruption Commission (EACC) is investigating 18 institutions over issues such as embezzlement, unethical conduct, and academic fraud. Moi University is accused of mismanaging Ksh2.2 billion and faces a workers’ strike, while Jaramogi Oginga Odinga University is under scrutiny for Ksh2.6 billion in fraudulent payments. Leadership wrangles at the University of Nairobi have drawn parliamentary attention, and Maasai Mara University faces a forensic audit over unexplained expenditures of Ksh3 billion. Legislators have called for transparency and immediate reforms to salvage these institutions. 

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The building and construction sector has been hardest hit by declining private sector credit, as high interest rates and stricter loan terms deter borrowing. According to the Daily Nation, the sector’s output contracted by 2.9 percent in Q2 2024, reversing a 2.7 percent growth in 2023. Cement consumption dropped 7.8 percent to 2.05 million tonnes, while bitumen imports fell 8.1 percent to 15.5 million tonnes. Manufacturing credit also declined, shrinking by 11.6 percent in October, despite improved agro-processing boosting GDP growth to 3.2 percent. Meanwhile, credit to transport, communication, and consumer durables posted modest growth, but the Central Bank of Kenya warns that falling credit supply will hinder economic growth. 

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The Standard reports that the government is set for critical discussions with the IMF to renew its Ksh303 billion lending programme, which expires in April 2025. Established in 2021, the programme aimed to aid Kenya’s pandemic recovery and address debt vulnerabilities. Talks coincide with a visit by IMF Deputy Managing Director Nigel Clarke, who brings extensive reform experience. However, Kenya faces mounting debt, now at Ksh10.79 trillion, and must implement reforms to meet IMF conditions. Concerns over a proposed Ksh193 billion UAE loan and ongoing corruption issues could complicate negotiations. The administration’s proposed tax hikes have sparked public backlash, highlighting the delicate balance between fiscal discipline and citizen welfare. 

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The Ethics and Anti-Corruption Commission (EACC) has been recognised for exemplary financial management, earning an unqualified audit opinion from the Auditor General for the 2023/24 financial year. The recognition was presented at the 22nd Financial Reporting Award (FiRe Award) ceremony held at Safari Park Hotel, Nairobi, on December 6, as reported by Citizen TV. The FiRe Award, a collaboration by ICPAK, CMA, NSE, and PSASB, celebrates transparency and accountability in financial operations. Receiving the award, EACC’s Director of Finance CPA Joel Mukumu highlighted the Commission’s robust financial controls and commitment to integrity, pledging continued adherence to public finance laws to safeguard taxpayer funds. 

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