By Nicholas  Waitathu

Nairobi,Kenya:Radical changes announced last week in the insurance and pension industry will form the foundation to establishing a consolidated authority to manage the country’s financial sector.

The changes will open avenues to foreign investors to take larger control of local insurance companies as  the industry seeks to enhance insurance coverage in the country.

Retirement Benefits Authority (RBA) Chief executive Edward Odundo said the changes proposed during the 2013/14 Budget would assist in strengthening key institutions in the financial sector to ensure high productivity.

“The changes are aimed at activating all the avenues in the sector with a view to encouraging more output and thus maximise benefits to the major players,” he said.

National Treasury Cabinet Secretary Henry Rotich, while presenting the Sh1.6 trillion Budget last Thursday, proposed far reaching changes in the financial sector.

Entire industry

Under the proposed changes, Insurance Act and Retirement Benefits Act will be overhauled and separate legislations enacted.

One Act of parliament will oversee entire industry and the other will drive regulations of the particular industry.

In the case of pension industry, one statute will supervise the entire industry while the other one will police the pension institutions.

Rotich also proposed amendments to the Insurance Act to open up ownership of insurance and brokerage firms to other citizens of the East African Community (EAC).

Rotich said the insurance sector has experienced some challenges over the years especially with regard to third party risk insurers.

Drafts ready

“To strengthen the regulatory framework and ensure a stable and growing insurance sector, I direct the Insurance Regulatory Authority to initiate an overhaul of the Insurance Act to align it with best international practices and our Constitution,” he said. Rotich said the assignment should be completed and drafts ready by end of September 2013.

“In the same spirit, I also direct the Retirement Benefits Authority to carry out a similar exercise and have drafts ready by end December 2013,” Rotich stated.

Odundo said the changes being effected in the financial sector are steps towards establishing a single authority to manage the sector like in advanced countries.