Insurance firms reveal budget day wish list

By John Oyuke

As Finance Minister Uhuru Kenyatta reads the Budget Speech on June 10, insurers will be on the edge of their sits, hoping the minister introduces reforms capable of enhancing growth and strengthening their position in the financial services sector.

Among their wishes is the introduction of compulsory insurance for public buildings against collapse, floods earthquakes, fire and storms. They say that 0.25 per cent of the net premiums will be paid into a Fire Services Maintenance Fund.

Proceeds from this proposed fund would be used for providing grants or buying equipment for institutions engaged in fire fighting services and other rescue and evacuation exercises.

Public buildings targeted include a tenement house (a block of flats), hostel, a building occupied by a tenant or any building open to members of the public.

Insurers also want to be allowed to invest all assets in excess of liabilities in any instrument irrespective of type or location of those investments.

Insurance firms are subject to rigid investment criteria, with Section 50 of the Insurance Act, specifying the spread and limits of investments they can make.

This, insurers say, has denied them the benefits of a wide diversified investment portfolio. "The rule has placed the industry at a distinct disadvantage," an official at the Association of Insurance Brokers of Kenya (AIBK) says.

They also want Association of Kenya Insurers AKI, AIBK and the Insurance Institute of Kenya to be legally recognised under the Insurance Act, as is the case in Tanzania and Uganda.

Recognition, they say, would help strengthen governance of the industry. Insurers also expects the budget to deliver the pursuit to have Section 71(1) (b) of the Insurance Act on restriction on loans and advances by an insurer reviewed.

Under this section, an insurer is permitted to grant an officer or employee an unsecured loan on compassionate grounds not exceeding Sh20, 000 provided that all previous loans are fully paid.

This amount, AKI and AIBK say, is restrictive because it prevents insurers from remaining competitive in the financial services sector. They want the amount raised to Sh100,000