njuguna ndung ’ u : developments in kenya ’ s insurance industry sector remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at the launch of continental reinsurance brand and products, nairobi office, nairobi, 5 july 2012. * * * 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

a definitive acknowledgement that he has clearly transcended the boundaries of a single discipline of economics, and turned into an influential public intellectual at the global level. 6. i have not read arvind ’ s new book. but having been governor for three years now, i know that one of the exclusive privileges of being the governor is to be able to talk about books without having read them. however, i have read about the eclipse, and so let me go on with my own understanding of arvind ’ s thesis in the book. 7. arvind thesis comprises three points : ( i ) as measured by an index made up of the share of world gdp, trade and investment, china will overtake america as the world ’ s dominant economic power sooner than people think. by 2030, china ’ s share of global economic power will match america ’ s in the 1970s and britain ’ s a century before. ( ii ) the three forces that will dictate this race to the top by china will be ( a ) demography, ( b ) convergence, which is the scope for “ catch up ” and ( c ) “ gravity ” which is a measure of the trade potential of a country. bis central bankers ’ speeches ( iii ) this projected rise of china to the top is imminent. the world should prepare for this through policies for reconciling china ’ s rise with continued openness in the global economic order. 8. arvind ’ s conclusions are clearly contentious and contestable. however, in the best practice of intellectual integrity : ( i ) he clearly lays out his assumptions about us and chinese growth rates. ( ii ) i believe he actually makes very conservative estimates above china ’ s growth rate relative to its stellar performance over the last two decades. ( iii ) he also argues out clearly why china will overtake america in the twenty - first century faster than america overtook britain in the nineteenth century. arvind ’ s arguments 9. arvind ’ s arguments and conclusions are persuasive for many reasons. ( i ) china has put out dazzling growth performance over the last two decades. we may dispute the fine numbers, but there is no doubt that what china has achieved by way of lifting hundreds of millions of poor people out of poverty is by far one of the most spectacular economic achievements in human history. ( ii ) last year, china overtook america as the world ’ s largest manufacturer, and overtook japan as the world ’