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23 Insurance Companies Risk Closure as Govt Warns Loss-Making Saccos
The Insurance Regulatory Authority has revealed that 23 Kenyan insurance companies ended 2023 with a Ksh32.2 billion capital shortfall, raising fears of potential closures due to non-compliance with minimum capital requirements. At the same time, the government has issued a stern warning to loss-making Saccos against using borrowed funds to pay dividends.
Emily Mutai
December 13, 2024
In partnership with
Greetings and welcome to the Twentieth Money Weekly Roundup of 2024!
This week, The Insurance Regulatory Authority (IRA) has disclosed that 23 Kenyan insurers are at risk of closure due to a combined Ksh32.2 billion capital shortfall, failing to meet the minimum capital requirements.
On the other hand, the government has warned loss-making Saccos against using borrowed funds to pay dividends, vowing legal consequences and stricter audits under the upcoming Cooperatives Bill 2024.
As always, weโve included some of our favourite personal finance articles in our Finance Tips section below.
Letโs dive in.
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NEWS RECAP
What happened this week
Returns on government securities have plummeted following consecutive cuts to the Central Bank of Kenyaโs (CBK) benchmark interest rate since August.
Key Insights:
The 91-day Treasury bill yield dropped from 15.7% in October to 10%.
Similar declines were recorded for 182-day and 364-day papers.
This trend has been attributed to economic growth-focused rate cuts, which have made Treasury securities less attractive, pushing investors toward alternative options.
The Insurance Regulatory Authority (IRA) reported that 23 insurers failed to meet minimum capital requirements in 2023, raising concerns about their ability to fulfill obligations.
The Numbers:
Capital Shortfall: Ksh32.2 billion across 23 companies.
Breaches include failure to settle claims promptly and inadequate capital levels.
Despite these challenges, the IRA remains committed to enforcing compliance to stabilize the sector.
๐ณ Banks Grapple with Capital Hike Requirements
Twelve Kenyan banks face a December 2025 deadline to raise Ksh11.85 billion to meet the new core capital requirement of Ksh3 billion.
Major Gaps:
Consolidated Bank: Ksh3.7 billion.
Access Bank: Ksh1.7 billion.
HFC: Ksh1.3 billion.
By 2029, the requirement will rise to Ksh10 billion, potentially driving mergers, acquisitions, or buyouts within the banking sector.
๐๐ถ Kenya Bids Big for the 2027 Grammys
President William Ruto confirmed a Ksh500 million payment in Kenyaโs bid to host the 2027 Grammy Awards, part of a broader effort to boost the creative economy.
Government Initiatives:
Introduction of the Creative Bill to strengthen intellectual property rights and combat piracy.
A simultaneous bid to host the 2027 World Creative Economy Conference.
The move aligns with Kenya's vision of positioning itself as a leader in Africaโs creative sector transformation.
Cabinet Secretary Wycliffe Oparanya issued a strict warning to Sacco managers against using borrowed funds to pay dividends, labeling such practices unsustainable.
Key Points:
Saccos with over Ksh1 trillion in member deposits face heightened audits under the Cooperatives Bill 2024.
Legal action will be taken against managers distributing dividends in loss-making Saccos.
๐ Gradual Lending Rate Reductions Announced
Following CBK rate cuts, banks have committed to lowering lending rates, though full adjustments will take time.
Challenges:
High costs of deposits locked at previous rates.
Rising living costs and delayed government payments add complexity.
The Kenya Bankers Association (KBA) noted that while some rate reductions will take effect in December, significant relief for borrowers will be progressive.y.
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MONEY TIPS & TOOLS
This weekโs finance tips
Welcome to Money254's Money Tips! Here, we share quick and easy tips that make understanding and managing your money a breeze. We break down the tricky parts of your finances and the financial landscape, making it simple and clear for you. Stay tuned for helpful tips every week.
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Thatโs a wrap for this weekโs Money Weekly!
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Tony and the Money254 editorial team.
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