REMARKS BY PROF. NJUGUNA NDUNG’U, GOVERNOR, CENTRAL BANK
OF KENYA ON THE OCASSION OF LAUNCH OF CONTINENTAL
REINSURANCE BRAND AND PRODUCTS, NAIROBI OFFICE – THURSDAY
5TH JULY, 2012 AT THE SERENA HOTEL.
The Chairman, Continental Re, Nigeria
Distinguished guests,
Ladies and Gentlemen.
Many thanks indeed to Continental Reinsurance for having invited me here
today at this auspicious occasion where Continental Re is launching its
brand in Kenya. It is extremely heartening to see such a strong attendance
for this breakfast meeting.
Firstly, allow me to spend a few moments to reflect upon the future of the
Kenyan insurance industry based on my experience, and to provide some
thoughts and advice on where reinsurers such as Continental Reinsurance
can contribute additional value in the sector.
The Kenyan insurance market wrote KShs. 100 billion of Gross Direct
Premiums in the year 2011. It has grown at an average rate of 16% p.a. over
the last 5 years. The market comprises of 45 insurance companies,
transacting long-term and short-term insurance business. In addition, there
are over 140 insurance brokers operating in the Kenyan insurance market.
Competition is strong and therefore clear market positioning is essential.
I am standing here today wearing two hats: one, as Regulator of the banking
sector and secondly, as a Board Member of the IRA. I have seen that there is
a strong requirement for products that are driven by a real need from
customers – products that appeal to a specific demand. I am happy to note
therefore that the industry is addressing the matter of innovation and are
designing new products particularly targeting the lower market. This is the

way in which the insurance industry will be able to enhance the level of
financial inclusion among the population.
By way of example, let us look at the agricultural sector – which, comprises
a vital 80% of our economy with a 26% contribution to GDP. Insurance and
reinsurance should play a bigger role in the development of the agricultural
sector in Kenya. I am sure that, Weather-index micro insurance schemes are
making a measurable impact where payouts enable farmers to recover from
what would otherwise be financial disaster. For instance in August last year,
3,380 farmers received compensation for the loss of their crops, totalling
approximately KShs. 150 million. The transfer of weather risk away from
these farmers to the international insurance markets strengthens the
resilience of farmers and agricultural businesses to weather impacts. It
provides additional – and important – security which also supports our
Kenyan economy.
A great benefit for the development of micro insurance is the deepening of
penetration per capita. Currently most micro insurance schemes are run as
small pilot type arrangements and continue to face a number of regulatory
and operational challenges.
I am informed that a policy framework paper has now been developed by the
micro insurance working group set up by the Insurance Regulatory
Authority and the same has been forwarded to the Ministry of Finance for
further attention. In this regard, the Minister during his budget speech
recognized micro insurance as a standalone class of insurance, giving it the
prominence that is deserves.
Ladies and gentlemen, insurance penetration in Kenya is 3% - high by
African standards, but with a long way to go still. I appeal to leaders and
operators in the sector to harness the growth opportunities and to think
forward, to think innovatively. For example, the recent discovery of oil and
gas in Kenya has marked a significant opportunity for this sector. We have

had the chance to see how other African countries have tackled the
discovery of important natural resources, and the onus is now firmly on us
to learn from their successes, and from their mistakes. We know, for
example, that there is long way to go to prepare our country for the
technical intelligence required to provide security around the multitude of
issues that accompany a discovery of this kind. I request the insurance and
reinsurance market to test out the structures in place for oil and gas
insurance. We need to be prepared as an industry and as a country in order
that we safeguard against future potential issues resulting from the mining
of our natural resources.
In this regard Mr. Chairman, I wish to applaud Continental Reinsurance’s
steps in progressing product innovation and development including Oil and
Gas, and look forward to learning from your experience.
Lastly, ladies and gentlemen, I urge the insurance industry to position itself
for the economic integration in the East African Union. As you are already
aware, the common market protocol of the East African Community (EAC)
creates a big market full of opportunities. This is the way to go in terms of
integration and expansion within the EAC and beyond. Indeed today’s
occasion is a realization of that spirit as we congratulate Continental Re (a
Nigerian company) on their authorization to transact fully reinsurance
business in Kenya. This trend is the beginning of what I predict will be the
future of the insurance and reinsurance market in Africa-spreading across
countries with free movement and with the opportunity to exploit full crossborder growth. I therefore challenge the industry to prepare for this
eventuality in a timely manner.
Once more ladies and gentlemen, I would like to thank the Continental
Reinsurance company on this auspicious occasion and to wish them all
success.
Thank you.