Capital Requirements for Kenyan Life Insurance Companies

Abstract

Purpose: A new legislative requirement in the year 2007 raised the minimum paid up capital for all insurance companies. It is the adequacy of this requirement that this study sought to explore from the industry players.   The study was guided by the following general objective: to explore the adequacy of the legislative minimum capitalization of life insurance Companies in Kenya. Methods: The study focused on all the Life Insurance companies in Kenya, the study respondents being the Chief Executive Officers, who are charged with the responsibility of charting the strategic direction of the respective Life Insurance companies. A case study design was used with a questionnaire as the main data collection tool. In addition, interviews were used to clarify the responses. The data was analyzed by employing descriptive statistics such as frequencies, mean scores and standard deviations. Statistical Package for Social Sciences (SPSS) was used to aid in analysis.Findings and Discussions: The findings of the study show that despite the increase in minimum capital requirement for the various categories of insurance companies, the minimum required capital amounts still fell far below expectations and higher figures were suggested. Indeed the increase in minimal capital requirements had not had a significant effect on the business of the life insurance companies. There is thus need to involve all industry stakeholders in order to arrive at minimum capital requirements that would be agreeable to all, for enhanced effectiveness in the industry.

Keywords: Capital requirements; Life Insurance