The Standard Formula: Encyclopaedia of Prudential Solvency – Chapter 12: Prudential Solvency Regimes in Africa

See all chapters of Encyclopaedia of Prudential Solvency and
A Guide to Solvency II.

Introduction

Prudential regulation across Africa is undergoing significant transformation. Regulators are gradually moving away from traditional, rules-based solvency requirements and adopting risk-based frameworks that better reflect insurers’ actual risk profiles, drawing inspiration from international standards and regimes such as Solvency II. While the pace and scope of these reforms vary by market, the objective has been consistent, namely to strengthen financial stability, protect policyholders, and support the sustainable growth and resilience of local insurance sectors.

This chapter examines five major African insurance markets: South Africa, Morocco, Egypt, Nigeria and Kenya. South Africa has the continent’s most mature prudential framework and the closest structural analogue to Solvency II. Each country has crafted a regulatory framework shaped by its own local market dynamics, but several common themes nevertheless emerge across these jurisdictions, including: the introduction of minimum capital and liquidity requirements; a stronger push for enhanced governance, risk management and disclosure standards; and a sharpened regulatory focus on whether insurers maintain adequate capital buffers, manage concentration risks and adapt to fast-moving developments, such as digitalisation and climate-related risks.

The trajectory of prudential regulation across Africa is clear, with recent reforms aimed at stronger oversight, transparency and an increasing alignment with global norms. Connections between the London market and Africa have also strengthened over recent years, demonstrated by the approval of Africa-linked syndicates at Lloyd’s of London (Lloyd’s), representing a significant milestone for African participation in the global insurance ecosystem. Strong underwriting performance from Africa-focused platforms has further reinforced market confidence in the sophistication and financial discipline emerging from African risk carriers. These developments signal the increasing integration of African insurers and reinsurers into global capital flows and cross-border regulatory standards, laying the groundwork for sustainable growth and deeper integration of Africa’s insurance sector into the international financial system.

1. South Africa

Background

South Africa has the continent’s largest and most developed insurance market, including some of the highest insurance penetration rates in the world. The life, non-life and reinsurance markets have seen steady and sustained growth over the years.

The South African insurance sector is governed by a modern prudential regime established under the Insurance Act of 2017 (Insurance Act),¹ together with the Long-Term and Short-Term insurance acts and the subordinate regulations published under them.² These operate alongside the Financial Sector Regulation Act of 2017 (FSR),³ together implementing the so-called “Twin Peaks” model whereby the Prudential Authority, which is housed within the South African Reserve Bank, oversees solvency, capital and risk; while the Financial Sector Conduct Authority supervises market conduct and the fair treatment of customers.⁴

The Insurance Act introduced a risk-based framework similar in design to Solvency II, with certain domestic variances tailored to reflect the South African market.⁵ The Prudential Authority enforces governance, capital and reporting obligations through prudential standards published on its website (Prudential Standards). These cover financial soundness, governance, operational risk and reporting obligations.⁶

All insurers, including microinsurers and reinsurers, must be licensed by the Prudential Authority.⁷ The Insurance Act distinguishes between life insurance business, non-life insurance business and microinsurance business, with separate Prudential Standards applicable to each class. Other than microinsurers, which have separate Prudential Standards, an insurer is not permitted to conduct both life and non-life business within the same legal entity.⁸

Lloyd’s operates in South Africa through a nationwide coverholder model, local brokers and an oversight office in Johannesburg. Rather than directly issuing policies, Lloyd’s utilises local partners to provide specialised commercial insurance and reinsurance solutions for South African businesses. These partners underwrite, set pricing and issue policies in South Africa on behalf of Lloyd’s syndicates. Lloyd’s underwriters are amongst the largest commercial insurers and reinsurers in the country.⁹

Foreign reinsurers and Lloyd’s underwriters may be approved to operate in South Africa through a locally licensed branch, provided they open a representative office and establish a trust.¹0 Once established, they are subject to the same regulatory oversight as domestic entities.

Structurally, South Africa follows a three-pillar prudential framework analogous to Solvency II. This covers quantitative requirements, qualitative requirements around governance and risk management, and reporting and disclosure obligations.¹¹

Capital Requirements

There are two key capital standards in South Africa’s prudential regulatory framework, designed to protect policyholders and ensure financial stability: the Minimum Capital Requirement (MCR) and the Solvency Capital Requirement (SCR).¹²

Minimum Capital Requirement

The MCR acts as a critical safety net, representing the lowest level of capital an insurer is permitted to hold. The Prudential Authority is expected to intervene immediately if an insurer falls below this level.

It is calculated using a simple, factor-based formula that reflects both the size and scale of an insurer’s business. However, this formula does not stand alone, and the numbers that are produced must meet further requirements, namely:

• A “linear formula,” which refers to a straightforward calculation that combines basic volume measure using fixed factors. This formula is calibrated to reflect the value-at-risk of an insurer’s basic own funds, assessed over a one-year period at an 85% confidence level.
• The MCR cannot fall below 25% or exceed 45% of the insurer’s SCR.
• There is an absolute floor in rand terms: The MCR must not be less than 15 million rand (approximately $925,000), and no less than 30 million rand for composite insurers. This rand amount is compared to 25% of the insurer’s annualised operating expenses over the previous 12 months, and the higher of the two figures becomes the final minimum capital level the insurer must hold.¹³ Insurers must calculate the MCR at least quarterly and report the results to the Prudential Authority.

Of note is that reinsurers writing both life and non-life insurance, referred to as “composite reinsurers” in the relevant Prudential Standard, must calculate separate MCRs for each of their life and non-life activities.¹⁴

Microinsurers

For microinsurers, the prudential framework is intentionally streamlined. Unlike other insurers, they are subject only to the MCR, without the additional SCR requirement. The MCR for microinsurers is calculated using a simple two-part formula: 15% of net written premiums over the previous 12 months, subject to an absolute floor of 4 million rand. This lower threshold reflects the smaller scale of microinsurance operations, while still requiring sufficient capital to absorb unforeseen losses.¹⁵

Additional capital requirements may be imposed on a microinsurer to address market risk. This is applicable only to microinsurers that elect to seek approval from the Prudential Authority to invest surplus assets in asset classes other than cash, cash equivalents or investment funds limited to money market instruments. Any resulting capital add-on will be determined by the Prudential Authority at its discretion and assessed on a case-by-case basis.

Lloyd’s

Lloyd’s and its representative in South Africa must also continuously monitor and maintain ongoing oversight of its financial soundness. The relevant standards for Lloyd’s are designed to ensure that Lloyd’s holds security in South Africa of sufficient quality and quantity to provide assurance, in combination with the regulatory capital requirements of Lloyd’s, that policyholder obligations will be met as they fall due and that Lloyd’s is able to absorb significant unforeseen losses arising from the risks associated with its insurance activities in South Africa.¹⁶

At the core of this framework is the regular valuation of technical provisions and assets, carried out at least quarterly or whenever a significant change in risk occurs. These valuations must be reported to the Prudential Authority in line with financial reporting schedules, and the Prudential Authority may request additional assessments at any time. Importantly, Lloyd’s must ensure that the assets held in the trust are sufficient to cover its technical provisions, adjusted for premium debtors, as of the latest quarter or the date of a regulatory request.¹⁷

Under South African regulation, Lloyd’s must ensure that its technical provisions reflect both a best estimate of expected liabilities and an additional risk margin. The best estimate represents the unbiased projection of future obligations, while the risk margin is designed to capture the uncertainty inherent in those calculations. The risk margin is determined as a percentage of the best estimate, after accounting for recoverables from eligible reinsurance contracts, and is calculated at the valuation date (t = 0). Most calculation methodologies applied to Lloyd’s are drawn from the framework set out in Prudential Standard FSI 2.2. This structure ensures that Lloyd’s valuations are not only consistent with the wider insurance industry but also sufficiently robust to safeguard against volatility and protect policyholders in the South African market.¹⁸

South African regulation requires Lloyd’s to maintain trust assets that are sufficient to cover its technical provisions, net of premium debtors. These assets must be valued in line with Prudential Standard FSL 2 for assets and Prudential Standard FSL 3 for technical provisions. Premium debtors may only be deducted if they are less than 120 days old and can be matched against future claims for each cedent. Lloyd’s must adjust the trust assets within 45 days to ensure compliance at each valuation date, with first‑quarter adjustments reflecting any external audit outcomes from the prior year. The funding requirement is centrally allocated to syndicates, and where a syndicate’s trust assets exceed the threshold agreed with the Prudential Authority, the excess may be withdrawn. This framework requires Lloyd’s to maintain adequate, properly valued security in South Africa, while providing flexibility for syndicates to manage surplus funds.¹⁹

Branches of Foreign Reinsurers

Branches of foreign reinsurers operating in South Africa (Branches) must hold, in trust, assets equal to their technical provisions less premium debtors, as security for insurance obligations arising from local business. Both assets and liabilities must be valued using market‑based methodologies, unless otherwise specified, and the types and spread of assets eligible for trust purposes are subject to regulatory limits. The framework for Branches combines the general financial soundness standards with additional, tailored requirements set out in the applicable Prudential Standard.²⁰

Branches are required to monitor their financial soundness continuously. There is a requirement for Branches to value and report their technical provisions and assets on a quarterly basis, whenever requested by the Prudential Authority, or when a material change in risk occurs. At all times, the assets held in trust must equal at least the value of technical provisions less premium debtors, with valuations conducted in line with Prudential Standards FSB 2 and FSB 3.

It is worth noting that premium debtors may only be deducted if they are less than 120 days old and can be matched against future claims for each cedent. Branches are required to adjust their trust assets within 45 days to maintain compliance, and first‑quarter adjustments must also reflect any changes arising from the external audit of the prior financial year. This framework requires Branches to maintain adequate, properly valued security.

Moreover, Branches must value their technical provisions in line with Prudential Standard FSI 2.2, subject to specific adjustments tailored to branch operations. Technical provisions must consist of a best estimate, calculated on a gross basis, and a risk margin reflecting the cost of capital needed to support obligations over their lifetime. Recoverables from eligible reinsurance contracts are calculated separately, with strict rules governing assumptions, counterparty default risk, and structural mismatches.²¹ Branches may only use eligible reinsurance contracts as risk mitigation instruments, and while they are not required to calculate a separate risk margin for reinsurance recoverables, they must adhere to the methodologies set out in Prudential Standard FSI 2.2.

References to capital requirements and eligible own funds are aligned with the jurisdictional legislation of the foreign reinsurer. Subject to Prudential Authority approval, Branches may adopt alternative methodologies for calculating the risk margin.²²

Solvency Capital Requirement

The SCR provides a risk-sensitive capital buffer designed to ensure that a sufficient minimum level of eligible own funds is held against the key risks to which an insurer is exposed, at a 99.5% level of certainty over a one-year horizon.

Insurers may calculate the SCR in one of two ways:

1. the standardised formula; or
2. a full or partial model, subject to prior approval from the Prudential Authority.²³

The standardised formula is designed for use by the majority of insurers in South Africa. Under this approach, insurers apply a set of prescribed stress tests and calculate capital requirements across three key risk categories: market risk, underwriting risk and operational risk. For each stress test, assets and liabilities are revalued to assess the impact on the insurer’s basic own funds. The results are then aggregated using a correlation matrix set out in the applicable Prudential Standard.

With prior approval from the Prudential Authority, insurers may apply to use a full or partial internal model to calculate the SCR instead of the standardised formula. Internal models are subject to strict safeguards and must be properly governed, independently validated, based on credible data and embedded in the insurer’s day-to-day management.²⁴ Insurers that intend to apply for approval to use an internal model must first inform the Prudential Authority of this intention and complete any prescribed pre-application procedures. Where an insurer is approved to use an internal model, it must perform a complete SCR calculation using that model on a quarterly basis, or as otherwise stipulated by the Prudential Authority. The insurer must also continue to use the internal model, unless and until approval is granted by the Prudential Authority to discontinue.²⁵

Similar to those in Solvency II jurisdictions, insurers in South Africa allocate own funds into three tiers:²⁶

• Tier 1 funds, such as paid-up common equity and the share premium account, which absorb losses first and enable the insurer to continue operating as a going concern.
• Tier 2 funds, such as called-up but not paid-in share capital.
• Tier 3 funds, such as deferred tax assets net of deferred tax liabilities.

Governance and Risk Management

The Prudential Authority expects insurers to maintain governance and risk systems that are proportionate to the size and complexity of their business.²⁷ Boards must establish effective control functions — such as risk management, compliance, actuarial and internal audit — and ensure independence of these functions.²⁸ For instance, Prudential Standard GOI 2 requires documented governance frameworks that are proportionate to the nature, scale and complexity of the insurance business and risks of the insurer; while Prudential Standards GOI 3 and GOI 3.1 mandate comprehensive and robust risk management systems, as well as requiring insurers to conduct a forward-looking, risk-based own risk and solvency assessment (ORSA) at least annually, or whenever there is a material change in their risk profile.²⁹

The purpose of the ORSA is to, amongst other things, ensure that an insurer is adequately capitalised and to test solvency across a range of possible scenarios, examining both the current position and likely financial soundness of the insurer in the future, on both an economic and regulatory basis.

Solvency Protection and Regulatory Intervention

The central objective of the prudential regime is to protect policyholders and promote financial stability. Insurers must continuously monitor and report their solvency positions, and the Prudential Authority maintains oversight by monitoring each insurer’s overall financial soundness.

Insurers or microinsurers that are likely to breach their SCR or MCR must immediately notify the Prudential Authority and submit a recovery or capital restoration plan.³⁰ Where the Prudential Authority is satisfied that an insurer has failed, or may within the following three months fail, to meet the prescribed capital standards, it may, in addition to directing the insurer to rectify the breach, suspend or withdraw the insurer’s licence, or exercise the resolution powers set out in chapter 9 of the Insurance Act.³¹ One of the remedies available to the Prudential Authority is the submission of an application for the winding up of an insurer where that insurer fails to meet its MCR requirement.

The process is similar for microinsurers. However, it is worth noting that chapter 9 of the Insurance Act does not apply to Branches, Lloyd’s underwriters or insurers that are a designated institution under the FSR.

Lloyd’s

Prudential Standard FSL 1 establishes clear trigger points for regulatory action in respect of Lloyd’s. For instance, the Prudential Authority may intervene where it determines that a Lloyd’s underwriter has failed, or is likely within three months to fail, to maintain the required security. Such intervention may include directing Lloyd’s to remedy the breach, or, in more serious cases, suspending or withdrawing Lloyd’s licence to operate. These powers are grounded in section 42 of the FSR.

The South African financial soundness framework also establishes clear points for regulatory action for Branches. If the Prudential Authority determines that a Branch has failed, or is likely within three months to fail, to maintain the required security, it may order corrective measures or suspend or withdraw the Branch’s licence.

Group Supervision and Intervention

For groups, South African regulation requires insurers to notify the Prudential Authority within 30 days of becoming part of a corporate group. This obligation is designed to keep the regulator informed of changes in ownership or group structure that may affect the insurer’s financial soundness, risk profile or supervisory oversight.³² When an insurance group is designated under South African regulation, two key elements must be defined:

• The scope of entities that will form part of the group must be clearly identified.
• One entity must be designated as the head of the group and the controlling company responsible for oversight and compliance.

This structure provides clarity in regulatory supervision. It enables the Prudential Authority to oversee the collective financial soundness of the insurance group while holding the designated head company accountable for compliance and governance.³³ When designating an insurance group, the Prudential Authority considers the scope of entities within the group, including in particular any entity that is significant to the group’s capital position or financial standing, as well as any entity that could introduce risks capable of producing material losses if realised. Furthermore, the framework places restrictions on capital management at the group level — the board of directors of the controlling company must obtain prior approval from the Prudential Authority before effecting any capital reduction, other than routine dividend payments. This is designed to preserve the financial resilience of group structures and maintain supervisory oversight.³⁴

In addition, South African regulation requires insurers and controlling companies to act swiftly if they fail to meet prescribed requirements. Where an entity does not hold assets in line with regulatory conditions or fails to provide adequately for technical provisions and liabilities, it must immediately notify the Prudential Authority, explain the reasons for the failure and outline corrective measures. If a controlling company fails, or is at risk of failing within three months, to meet its group solvency capital requirement, it must notify the Prudential Authority without delay. In such cases, the Prudential Authority may require the submission of a recapitalisation strategy within two months, setting out measures to restore eligible own funds or reduce the risk profile. Implementation must occur within six months, though extensions may be granted in certain circumstances. Approved recapitalisation schemes demand monthly progress reports and, during this period, the Prudential Authority may restrict or prohibit specific activities until capital requirements are met and financial soundness restored.

The regulatory framework in South Africa also places emphasis on the financial strength of significant owners of financial institutions. Prima facie evidence that an owner may lack the necessary financial standing includes situations where the owner does not have access to adequate funding or future capital to support the institution, or where the owner is unable or unlikely to be able to meet its financial obligations as they fall due.

These criteria are designed to prevent ownership structures from compromising the stability of financial institutions, and to ensure that significant owners are capable of supporting the business when required.

2. Morocco

Background

Morocco’s insurance sector is primarily governed by Law No. 17-99 of the Moroccan Insurance Code, which has been amended over time to incorporate evolving prudential requirements. The Autorité de Contrôle des Assurances et de la Prévoyance Sociale (ACAPS), the Moroccan regulatory authority, is responsible for supervising insurance and reinsurance companies, ensuring their financial stability and protecting policyholders.

In recent years, Morocco has embarked on a major reform with the introduction of a risk-based solvency framework inspired by Solvency II. This shift marks a move away from a rules-based, retrospective approach to one that is more forward-looking and risk-sensitive.

The Moroccan insurance market has grown rapidly, both in size and in complexity. By 2017, Morocco ranked second in Africa and third in the MENA region by insurance premiums, with steady growth continuing since. Against this background, the existing solvency margin approach was seen as insufficient as it did not fully capture the range of risks insurers were facing. Recognising this shortcoming, ACAPS and the Moroccan Federation of Insurance and Reinsurance Companies undertook a comprehensive prudential reform initiative designed to align the regulatory framework more closely with the risks that insurers encounter in practice.

The New Framework

The new framework, with anticipated implementation in the third quarter of 2026 through an ACAPS circular, adopts the familiar three-pillar structure from Solvency II:

• Pillar I: Quantitative requirements relating to capital, technical provisions and asset valuation.
• Pillar II: Qualitative requirements relating to governance, risk management and internal controls.
• Pillar III: Disclosure requirements focussing on transparency and disclosure, ensuring regular reporting to the regulator and the public.

However, while the principles are broadly similar to those of Solvency II, it is expected that Morocco will take a more conservative approach in relation to certain requirements in practice, particularly with respect to the aggregation of risks. The additive approach to risk aggregation (as detailed below) means Moroccan insurers will be required to hold more capital than they would be required to hold under a diversification-recognising framework such as Solvency II. While this is intended to enhance policyholder protection and systemic stability, it may also carry potential risks of reducing competitiveness, limiting product innovation and constraining investment strategies.

Pillar I: Quantitative Requirements

Under both the new Moroccan framework and Solvency II, insurers must calculate an SCR set at a 99.5% confidence level, which is designed to ensure they can withstand severe but plausible shocks.

Technical provisions are to be determined using a “best estimate” methodology that involves discounting and assigning probabilities to future cash flows in order to account for both the time value of money and the associated risks. The new Moroccan regime will utilise a yield curve based on treasury bill rates published by Bank Al-Maghrib and constructed using the Smith-Wilson method, which extrapolates interest rates beyond observable market data. This is similar to the European Insurance and Occupational Pensions Authority curve under Solvency II, but with local calibration.

A key difference between the two frameworks lies in the approach to risk aggregation. Solvency II utilises a correlation matrix to aggregate risk modules, recognising diversification benefits between different types of risk. In contrast, the Moroccan framework uses an additive approach that assumes perfect correlation, meaning that all risks are assumed to peak simultaneously. This results in higher, more conservative capital requirements but less capital efficiency, and has been the subject of some discourse within the Moroccan insurance sector.

Much like Solvency II, the Moroccan framework organises risks into modules. These include, amongst others: market risk, counterparty risk, concentration risk and operational risk. However, some risk modules present in Solvency II — such as intangible asset risk — are not included.

Technical provisions under the Moroccan framework will be valued by reference to the category of insurance and reinsurance activity, whereas Solvency II recommends calculating technical provisions by line of business. Such technical provisions will be calculated as the sum of the best estimate of liabilities, the best estimate of management costs, and a risk margin. The best estimate is the probability-weighted present value of future cash flows, segmented by category of insurance activity.

For life insurance, Morocco will require segmentation into four categories, compared to six under Solvency II. Both frameworks allow for contract aggregation when individual calculations would be unduly burdensome, provided that the grouping does not distort risk assessment.

Pillar II: Governance and Qualitative Requirements

The qualitative pillar will mandate robust governance systems, including requirements for risk management, internal audit, actuarial and compliance functions. These must be independent and capable of producing reliable data. Insurers will also be required to have effective outsourcing controls and to manage group risks if they form part of a larger group.

Similar to Solvency II, the Moroccan framework will require insurers to adjust technical provisions for the risk of reinsurer default. The adjustment is based on the probability of default and recovery rates, segmented by reinsurer and line of business. As with Solvency II, Morocco will utilise a table of default probabilities based on credit ratings, but with its own local calibration.

Pillar III: Disclosure Requirements

The disclosure pillar focusses on transparency and open communication. Insurers will be expected to report prudential and statistical information to ACAPS on a regular basis, and to provide relevant information to policyholders and the public. The expectations in this area are robust and broadly consistent with those adopted by other risk-based frameworks.

Future Developments

The new Moroccan framework is yet to be formally implemented. However, as the Moroccan insurance market continues to mature, there may be pressure from insurers to introduce some changes including a correlation matrix for risk aggregation, the refinement of risk modules and calibrating parameters based on local experience. In this context, some potential future developments may include:

• Recognition of diversification effects in capital aggregation, moving away from the current additive approach.
• Expansion of risk modules to include health, disability and other risks.
• Calibration of parameters using Moroccan data and experience.
• Potential adoption of internal models for capital calculation as seen in Solvency II.
• Enhanced governance and disclosure requirements to further align with international best practices.

As with any jurisdiction seeking to align with international standards, the key challenge is ensuring that the framework is well suited to the local market while also facilitating a globally competitive regulatory environment.

3. Egypt

Background

Egypt’s insurance market stands out as one of the largest in North Africa, serving a population of over 100 million people. It includes a diverse mix of state-owned, private and foreign insurers, along with takaful,³⁵ microinsurance and specialised medical insurance providers.³⁶

The Financial Regulatory Authority (FRA) is the primary regulator, responsible for the establishment, licensing, supervision and enforcement of all insurance and reinsurance activities.³⁷ The FRA may issue executive decisions governing such activities, including methods for risk assessment and management, as well as standards and rules for financial solvency.

The Egyptian insurance and reinsurance sector, together with related insurance professions such as actuarial experts, insurance consultants, reinsurance brokers and risk assessment experts, is now governed by a unified insurance law, which consolidates previously fragmented legislation into a single, comprehensive framework (Unified Insurance Law).³⁸ The objectives of the Unified Insurance Law are to consolidate and modernise insurance regulation, enhance market efficiency and transparency, strengthen policyholder protection, and encourage digital innovation and investment.

Licensing and Market Entry

To enter the Egyptian insurance market, companies must be established as joint-stock companies in Egypt, with their purpose limited to a specific insurance activity, service, or related profession as provided under the Unified Insurance Law. The FRA may reject an incorporation request if it does not meet these requirements.³⁹ Except for microinsurance and specialised medical insurance companies, companies may not carry out life insurance and wealth formation activities alongside property and liability insurance.

The number of founders in the joint-stock companies must not be less than three, and their issued capital must not be less than 250,000 Egyptian pounds (approximately $4,770), of which 10% must be paid upon incorporation — the threshold is increased to 25% within three months from the date of the company’s incorporation, with the remaining amount to be paid no later than five years from the date of incorporation.⁴⁰ This is without prejudice to the provisions of laws and regulations specific to certain companies engaged in particular types of activities. In addition, companies that are subject to the Unified Insurance Law are governed by the Companies Law, although only insofar as there are no competing provisions under the Unified Insurance Law or the executive decisions issued in connection with this.

In addition, under Article 162 of the Unified Insurance Law, the minimum fully paid-up issued capital requirements are as follows:

• EGP 250 million (in cash, or its equivalent in freely convertible foreign currencies accepted by the Central Bank of Egypt) for a life insurance and capital/wealth formation company.
• EGP 250 million (in cash, or its equivalent in freely convertible foreign currencies accepted by the Central Bank of Egypt) for a non-life (property and liability) insurance company, provided that such capital is increased by EGP 50 million in the event of engaging in any of the petroleum, aviation, or energy sectors.
• EGP 1 billion (in cash, or its equivalent in freely convertible foreign currencies accepted by the Central Bank of Egypt) for a reinsurance company.

Beyond legal form, capitalisation is a key consideration. As of January 2025, the FRA introduced strict requirements for both new and existing firms to meet minimum fully paid-up issued capital thresholds:

• For life insurance and capital or wealth formation companies, and property and liability insurance companies, the threshold is EGP 400 million, increasing to EGP 600 million within two years from the effective date of Resolution No. 196 of 2024, issued by the FRA under the Unified Insurance Law.
• For non-life insurer companies engaged in petroleum, aviation, or energy, the threshold is EGP 450 million within one year, rising to EGP 650 million within two years from the effective date of Resolution No. 196 of 2024.
• For reinsurance companies, the minimum fully paid-up capital threshold is EGP 1 billion.

The FRA is further empowered under the Unified Insurance Law to increase the minimum capital requirements as it deems appropriate, with a view to strengthening the insurance market. Moreover, strict requirements apply to the source and quality of capital, which must be fully paid in Egyptian pounds or freely convertible equivalent foreign currency accepted by the Central Bank of Egypt.

Governance and suitability are central to the licensing process. Founders looking to establish an insurance or insurance-related business in Egypt are required to demonstrate integrity, good reputation, and the absence of convictions for dishonesty or financial misconduct. Additionally, where a foreign company or financial institution is subject to the supervision and oversight of a competent foreign authority in the jurisdiction of its head office, such authority must approve its operation in Egypt and must apply the principle of consolidated supervision.⁴¹ The FRA retains discretion to reject applications that do not meet regulatory standards or market needs.

Moreover, the Unified Insurance Law explicitly addresses digital insurance, introducing specific standards for digital insurance providers and requiring substantial investments in technology and compliance capabilities.⁴² All companies subject to the provisions of the Unified Insurance Law are required to establish a licensed website approved by the FRA, containing sufficient disclosure and transparency for clients regarding their terms and operations — including, in particular, the company’s purpose, the type and form of insurance it conducts, and the key decisions issued by its management.⁴³

Prudential Solvency Requirements

Resolution No. 148 of 2025 (Resolution) prescribes the solvency requirements insurers must now comply with. Under the new regime, insurers must maintain higher capital buffers than previously required.⁴⁴ The Resolution imposes an obligation on applicable companies to maintain a solvency margin, such that the value of their admissible assets exceeds their admissible liabilities,⁴⁵ by at least 125% of the required solvency margin at all times.⁴⁶

One major change introduced by the Resolution is the establishment of two distinct methodologies for calculating the required solvency margin, depending on the business class of the insurance, distinguishing between: (i) property and liability insurance companies; and (ii) life and capital accumulation insurance companies.

Property and Liability Insurance Companies

The required margin for property and liability insurance companies must be calculated using both a premium-based method and a compensation-based method; the higher of the two values is subsequently used. Up to the end of the 2027 financial year, the requirement is set at 20% of net premiums or 25% of net compensation incurred across all insurance branches, with the special reserve balance added during the calculation for the purpose of net compensation. Following the 2027 financial year, differentiated rates will apply, comprising an amount equivalent to the sum of 30% of net premiums or compensation for the engineering, aviation, petroleum and energy insurance branches, and 25% of net premiums or compensation for other insurance branches.⁴⁷

Life and Capital Accumulation Insurance Companies

For life and capital accumulation insurance, the financial solvency margin is determined by applying the prescribed percentage to the insurance capital and then adding the required technical provisions, minus the liabilities after reinsurance. The required solvency margin is set as the aggregate of:

• 0.3% of sums insured under active contracts at risk, subject to a maximum 50% reduction for reinsurance.
• 4% of provisions for outstanding coverage, subject to a maximum 15% reduction for reinsurance.
• 1% of reserves relating to the investment component associated with investment units and fund accumulation absent a guarantee, or 4% where a guarantee is provided.

In addition, the special reserve balance — included within equity and calculated in accordance with Egyptian Accounting Standard No. 50 — shall be added when calculating the technical provisions for the required solvency margin.

In all cases, the required solvency margin must not fall below the minimum paid-up capital thresholds set by the FRA, and reliance on unregistered reinsurers is excluded from the calculation.⁴⁸

Valuation of Assets and Liabilities

The new regime introduces tighter regulatory rules concerning the valuation of assets and liabilities, aimed at strengthening the financial stability of insurance companies by enhancing the quality of assets.⁴⁹

As for the valuation of assets, a company may account only for net assets recognised in its financial statements, while the regulations also broaden the categories of assets excluded from the solvency margin calculation.⁵⁰ Excluded assets now comprise categories such as:⁵¹

• Investments in other insurance companies operating in Egypt in the same line of business.
• Investments exceeding statutory concentration limits.
• Financial investments abroad, unless made through approved subsidiaries or branches.
• Financing provided to third parties, other than financing granted to policyholders secured by their policies.
• Overdue receivables older than three months.
• Excess policyholder account balances.
• Intangible assets.
• Treasury shares.

In addition to this, the FRA retains regulatory discretion to exclude any asset which it deems to lack sufficient guarantees.⁵² To ensure that financial capacity is assessed in a more objective and accurate way, the new regime also prohibits insurers from counting technical provisions as assets.⁵³

As for the valuation of company liabilities, this includes all liability items recorded in the company’s financial statements together with the balance of the special reserve. Liabilities shall be considered whether they are actually due or are technically estimated, and shall be recognised at the values approved by the FRA based on the technical and financial review it conducts in this regard. This excludes: (i) the contractual service margin included within insurance contract liabilities; (ii) the subordinated loan provided by shareholders; and (iii) the qard hasan granted by shareholders to cover deficits in the activities of takaful insurance companies,⁵⁴ which are recorded under creditors and other payables.

Regulatory Enforcement Powers

The FRA has been granted strong and extensive enforcement powers where an insurer’s solvency margin falls below legal limits.

If a company’s available solvency margin drops to between 100% and 125% of the required solvency margin, the FRA may instruct the insurer to restore compliance within a period not exceeding the end of the following financial year. However, if the solvency margin falls below 100%, the FRA may require immediate corrective actions, such as requiring the company to:

• Retain distributable profits to cover the shortfall in the solvency margin.
• Raise capital according to a plan prepared by the company and approved by the FRA, in the event that sufficient profits are not available to cover the shortfall.

A company may cover the solvency margin deficit by obtaining a subordinated loan from its shareholders, in accordance with specific terms and conditions set by the FRA.

Transitional Issues and Challenges

Although the new rules are aligned with the FRA’s broader trend towards strengthening the financial resilience of the Egyptian insurance sector, the reforms have raised a number of issues.

Transitional Ambiguity

The transition from the old, fragmented set of rules to the new Unified Insurance Law has created some uncertainty, owing to a lack of clear guidance on how to handle insurance contracts established under the old regulations. For example, the Unified Insurance Law does not specify which set of rules will govern old contracts, or whether these will need to be amended to comply with the new framework, thereby creating substantial regulatory uncertainty and a likelihood of disputes.⁵⁵

While the FRA has played a positive and cooperative role in clarifying the confusion surrounding the transition period, much remains to be done. Through joint workshops with the Ministry of Justice, the FRA has provided training to economic court judges on the provisions of the law, promoting consistency in legal interpretations and accelerating the resolution of disputes. Additionally, the FRA has introduced programmes to inform companies about the new requirements and offer guidance. However, until the disputes under the old regulatory regime are resolved, economic and legal ambiguity will continue to characterise insurance contracts established under the previous regulatory regime.

Uncertainty Relating to Capital Participation

A difficulty arises from the provisions of article 177 of the Unified Insurance Law, which stipulates that a company subject to the provisions therein shall not, directly or through any of its related parties, participate in the capital of another insurance company carrying out the same type of activity in Egypt.

This article, however, does not address the situation of companies that held stakes in another insurance company engaged in the same type of activity in Egypt prior to the effective date of the Unified Insurance Law; this is despite the fact that the Unified Insurance Law stipulates that all entities subject to its provisions must regularise their status in accordance with its requirements within one year from its effective date.⁵⁶ The board of directors of the FRA may extend this period for additional terms, provided that the maximum extension does not exceed three years from the effective date of the Unified Insurance Law.

In this regard, the FRA issued Decision No. 102 of 2025, extending the deadline for regularising status in accordance with the provisions of the Unified Insurance Law for an additional year, starting from 11 July 2025. The decree provides that this extension is granted without prejudice to the timeframes for regularising status, which are set out in the decisions issued by the FRA’s board of directors. It remains to be seen whether this extension provides an adequate solution to the issue.

Future Direction

Overall, Egypt’s new prudential solvency regime represents a substantial reform of the country’s insurance sector. The reforms are intended to produce a more transparent market, aligned with international standards in a manner compatible with the nature and characteristics of the Egyptian market.⁵⁷

While the transition poses challenges, the reforms are expected to foster a more competitive market. Ongoing efforts to clarify transitional arrangements, support smaller insurers and strengthen corporate governance and risk management will be key to the regime’s long-term success.

The impact of the reforms has already begun to appear, as reflected in the Central Bank of Egypt’s Financial Stability Report issued in March 2025 which highlighted the continued strong performance of insurance companies, including increases in asset values, equity, premiums, and claims, reinforcing the important role played by insurance companies in the Egyptian economy.⁵⁸ As the regulatory framework continues to mature, the sector is expected to play an increasingly pivotal role in supporting sustainable growth and strengthening the nonbanking financial sector in Egypt.

4. Nigeria

Background

Nigeria’s insurance industry is an emerging and fast-growing segment of the country’s financial services sector. According to a report published by the National Insurance Commission (NAICOM), the market recorded gross written premiums of 1,213.7 billion naira in the second quarter of 2025, equivalent to approximately $885 million. This represents a 57.8% growth compared to the previous quarter and a 49.3% growth compared to the same period of the previous year. Life insurance business contributed 32.8% of gross written premiums (GWP) in the second quarter of 2025, with non-life insurance representing the bulk of the GWP for this period and oil and gas accounting for 31.2%.⁵⁹

The Nigerian insurance sector is undergoing a transformative shift with the enactment of the Nigerian Insurance Industry Reform Act (NIIRA),⁶⁰ marking the most significant overhaul of the country’s insurance framework in more than 20 years.⁶¹ NIIRA repeals and consolidates a number of existing insurance laws into a unified framework that aligns with global solvency standards, while also addressing the realities of the domestic Nigerian market.

NAICOM is Nigeria’s prudential regulator, responsible for setting industry standards and regulating transactions between insurers and reinsurers.⁶² NIIRA codifies NAICOM’s long-planned transition from a compliance-based model to a risk-based supervision regime, closely aligned with Solvency II principles. The framework assesses each insurer’s capital adequacy relative to its risk profile, rather than applying uniform solvency thresholds.

Capital Requirements

NIIRA introduces a hybrid capital adequacy model, representing one of the most significant features of Nigeria’s new prudential regime. Under this system, each insurer must maintain the higher of either a fixed statutory MCR or the risk-based capital level determined by NAICOM. This blends rule-based and risk-sensitive elements, requiring insurers to meet a minimum prudential standard while allowing supervision to reflect each insurer’s true risk position.

The statutory MCR has increased significantly from the previous Nigerian regime, triggering a recapitalisation cycle. NIIRA sets minimum capital requirements of:⁶³

• 15 billion naira for non-life insurance.
• 10 billion naira for life insurance.
• 35 billion naira for reinsurance.

NAICOM is given discretion under NIIRA to calculate the risk-based capital for each insurance business and to apply the higher of the two values in terms of the MCR. The types of risk that must be considered include insurance risk, market risk, credit risk and operational risk.⁶⁴ Existing insurers have been given 12 months from the commencement date of NIIRA to comply with the MCR requirement,⁶⁵ with a deadline of 30 July 2026 to meet compliance requirements.

If an insurer wishes to commence operations in Nigeria, it must deposit 50% of the MCR with the Central Bank of Nigeria.⁶⁶ For existing insurance companies, this is reduced to 10%.⁶⁷ Once registration is successful, the Central Bank of Nigeria returns 80% of this deposit.⁶⁸

Risk-Based Capital Methodology

While NIIRA mandates the shift to risk-based capital, it leaves the specific methodology to NAICOM. NIIRA outlines the guiding principle stating that, in determining the risk-based capital, NAICOM shall consider the capital required for each of the insurance risk, market risk, credit risk and operational risk, and apply appropriate capital charges. This modular structure is similar to the risk modules of the Solvency II standard formula, although the specific calculations, calibration and correlation matrices, and the ultimate prudential standard (such as Solvency II’s 99.5% value-at-risk standard), are not defined in NIIRA.

NAICOM’s implementation circular confirms the transition to a risk-based capital framework but indicates that detailed guidelines and a standardised computation template will follow. At the time of preparing this chapter, the detailed guidelines and standardised computation template had yet to be issued.

Solvency Margins and Admissible Assets

NIIRA mandates that every insurer carrying on business in Nigeria maintain a capital adequacy ratio of 100%,⁶⁹ although this may be further adjusted by NAICOM.⁷⁰

When calculating capital, the following types of assets are explicitly excluded, with NAICOM having broad discretion to exclude any other asset class:⁷¹

• Goodwill and any intangible assets.
• Deferred tax income or deferred tax assets.
• Any assets pledged towards credit facilities.
• Prepayments.
• Fixed assets and computer equipment.
• Unsecured loans.

There are additional requirements for reinsurers, which must maintain a general reserve fund comprising at least 50% of the original insurer’s gross profit for the year if the fund falls below the authorised capital of the insurer, and at least 25% of the reinsurer’s gross profit for the year if the fund is equal to or exceeds the authorised capital of the reinsurer.⁷²

Own Funds

Although NIIRA does not specifically reference own funds, it outlines the types of funds that may be considered under the MCR. For new insurance companies, this includes government bonds and treasury bills, as well as cash and cash equivalents.⁷³ For existing companies, the MCR may consist of the excess of admissible assets over liabilities, minus any own shares held by the firm, subordinated liabilities subject to approval by NAICOM and any financial instrument approved by NAICOM.⁷⁴

Reporting Requirements

Insurers must report their risk-based capital levels to NAICOM as of 31 December of the previous year, and submit this report on or before 31 March each year.⁷⁵ This represents a step up in internal monitoring and reporting compared to the old regime.

Regulatory Enforcement and Supervision

NIIRA considerably strengthens NAICOM’s enforcement and supervisory powers. NAICOM may cancel an insurer’s licence on a broad range of grounds,⁷⁶ including failure to satisfy capital or solvency requirements, nonsubmission of statutory returns, persistent unpaid claims and carrying on business contrary to sound insurance principles. Before any cancellation, NAICOM must issue a written notice giving the insurer a 30-day remediation period, during which the insurer may not carry on licensable activity.⁷⁷

An aggrieved insurer may appeal to the board of NAICOM within 30 days, with judicial review available before the Federal High Court within 60 days of cancellation.⁷⁸ Beyond cancellation, NAICOM may assume control of an insurance institution,⁷⁹ appoint a provisional liquidator and petition for winding-up under the Companies and Allied Matters Act.⁸⁰

Criminal sanctions include fines of up to 50 million naira or imprisonment for up to two years for operating without a licence.⁸¹

Insurance Policyholders’ Protection Fund

NIIRA also establishes an Insurance Policyholders’ Protection Fund (IPPF), the purpose of which is twofold:

• To facilitate the resolution of distress and insolvency among licensed insurers and reinsurers.
• To ensure payment of admitted claims that remain outstanding by reason of the insolvency or licence cancellation of the insurer or reinsurer concerned.

The IPPF is financed through two principal sources: first, a levy of 0.25% of the gross premium income of every insurer and reinsurer, payable annually; and second, an allocation equal to 0.25% of the balance standing to the credit of the Security and Insurance Development Fund as at 31 December of the preceding year, net of all financial obligations.⁸²

In April 2026, NAICOM issued the Guidelines for the Collection, Management and Administration of the IPPF pursuant to the NIIRA. Under these Guidelines, insurers and reinsurers are required to submit IPPF Assessment Returns by 31 March each year, setting out the gross written premium and brokerage commission for the relevant assessment period.

Contributions must be remitted into the IPPF’s designated accounts with deposit money banks no later than 30 June of each year, calculated based on audited or management financial statements as of 31 December of the preceding year. Where contributions are initially assessed using management financial statements, such payments are treated as provisional.

Upon confirmation of the final amount due from audited financial statements, any shortfall must be settled within 10 working days of receiving the final assessment, while overpayments are credited toward subsequent obligations.⁸³

Comparison With Solvency II

While Solvency II uses a market-consistent balance sheet, Nigeria retains a more conservative prudential filter for determining admissible assets. Items such as goodwill, deferred tax assets, encumbered property and unsecured loans are assigned zero value for capital adequacy purposes. This reflects Nigeria’s preference for liquidity and verifiable ownership, emphasising the preference for capital held in risk-free or government-backed instruments.

Comparing the two regimes across the three prudential pillars:

• Whereas Solvency II’s capital requirement is purely risk-based and calibrated to a 99.5% value-at-risk, the Nigerian regime follows a hybrid model requiring insurers to meet the higher of the fixed MCR or NAICOM-determined risk-based capital, and applies a stricter filter on admissible assets.
• Solvency II mandates a robust governance framework including an ORSA, which is broadly mirrored in the Nigerian regime.
• Solvency II requires insurers to publish solvency and financial condition reports annually; the Nigerian regime has similar disclosure requirements whereby financial condition reports prepared by an actuary are publicly disclosed and submitted to NAICOM.

The qualitative and disclosure pillars are therefore substantially aligned with Solvency II, while the quantitative pillar diverges by design, with Nigeria’s model emphasising immediate capital strength and market discipline over model-driven precision.

Challenges and Opportunities

The main challenge for insurers and reinsurers will be meeting the higher minimum capital requirements. This may drive increased M&A activity in the sector as smaller players look to consolidate, and insurers may also raise fresh capital through private placements or rights issues. On the opportunity side, moving to a risk-based framework has the potential to make the Nigerian insurance sector more attractive to foreign investors, given its alignment with global prudential standards.

5. Kenya

Background

Kenya’s prudential framework has experienced significant evolution in recent years. Overseen by the Insurance Regulatory Authority (IRA), it combines risk-based capital requirements, hard capital floors, leverage constraints, and liquidity safeguards.

At the heart of the Kenyan solvency regime for insurers is the Insurance Act, Chapter 487 (Kenyan Insurance Act), together with the associated capital adequacy guidelines (Capital Adequacy Guidelines).⁸⁴ Kenya moved to a risk-based capital adequacy framework in June 2020, a transition that has coincided with a period of sustained market growth. By 2024, the insurance industry in Kenya recorded gross premium income of 400.59 billion Kenyan shillings (approximately $3.095 billion), with both the long-term and general insurance segments contributing meaningfully to that expansion. Industry profitability rose sharply, reaching 30.41 billion Kenyan shillings — roughly a third higher than the prior year — while the overall industry asset base grew to 1.25 trillion Kenyan shillings. The market’s upward trajectory is expected to continue, with gross written premiums projected to reach approximately 1.08 trillion Kenyan shillings by 2026, driven in particular by life insurance with an anticipated market volume of 615.7 billion Kenyan shillings.⁸⁵

Looking ahead, Kenya’s insurance market is expected to continue growing, with gross written premiums forecast to rise at approximately 3% annually between 2026 and 2030, reaching around 1.256 trillion Kenyan shillings.⁸⁶ This positions Kenya as a market with significant potential for insurers operating domestically and internationally.

While the legal and regulatory frameworks underpin that attractiveness, a number of smaller Kenyan insurance companies have faced challenges in meeting solvency and compliance requirements. The regulator has historically afforded some flexibility, but has recently adopted a stricter posture in order to safeguard market stability and policyholder protection.

Regulatory Enforcement and Supervision

The IRA is a relatively active enforcer of its regulatory mandate, with regular inspections of all insurers, documented enforcement actions, and penalties across the industry.

The IRA can exercise the various enforcement mechanisms provided for by the Kenyan Insurance Act, including the power to place an insurer under statutory management. Where a party is aggrieved by the decision of the commissioner of insurance, they may appeal to the Insurance Appeals Tribunal within one month of the decision being given.

Most recently, the IRA placed three insurers under statutory management, with the Policyholders Compensation Fund appointed as the statutory manager in April 2026. This comes in the wake of increased implementation of the risk-based capital requirements applicable to insurers as competition intensifies in the industry.

Capital and Solvency

Insurers are required to maintain a minimum capital adequacy ratio (CAR) of 100%, held as Tier 1 capital.⁸⁷ Where the CAR is below 100%, the IRA has the power to intervene in management.⁸⁸ Conversely, where an insurer has attained a prescribed CAR of 200%, the IRA is precluded from intervening in its management on capital adequacy grounds.⁸⁹

The risk-based capital calculation requires insurers to hold capital commensurate with the risks they underwrite. The capital required is first determined individually for insurance risk, market risk and credit risk, and is then aggregated using the square root of the sum of their squares to account for diversification. The capital required for operational risk is added to the resulting total.⁹⁰

This results in a capital requirement that is sensitive to each insurer’s particular risk profile, rather than a uniform fixed threshold.

Core Capital Requirements

The core capital requirements are set out in the second schedule of the Kenyan Insurance Act.⁹¹ These requirements are hard floors that must be maintained at all times and differ depending on the class of insurance business, with insurers required to maintain a minimum paid-up capital, held in government securities, deposits or cash equivalents:

For general insurance, insurers must maintain minimum paid-up capital, which must be the highest of three thresholds: (i) 600 million Kenyan shillings; (ii) the risk-based capital set by the IRA; or (iii) 20% of net earned premiums from the preceding financial year.⁹² Such capital must be held in the form of government securities, deposits, or cash and cash equivalents. For long-term insurance, the threshold is set at the highest of: (i) 400 million Kenyan shillings; (ii) the risk-based capital as determined by the IRA; or (iii) 5% of life business liabilities for the year.⁹³

Reinsurers face more stringent requirements:⁹⁴ For general reinsurance business, the minimum is the higher of: (i) 1 billion Kenyan shillings in paid-up share capital; or (ii) 20% of the net earned premiums of the preceding financial year. For long-term reinsurance business, the minimum is the highest of: (i) 500 million Kenyan shillings in paid-up share capital; (ii) the risk-based capital; or (iii) 5% of life business liabilities.

The risk-based capital component is periodically recalibrated by the IRA, allowing the regime to remain responsive to evolving market conditions and risk profiles.

In addition to the risk-based and absolute capital floors, Kenya’s regime incorporates a leverage-style backstop. This is a non-risk-based constraint, designed to prevent excessive balance sheet expansion relative to core capital. By introducing core capital thresholds of 20% of the net earned premiums of the preceding financial year for general insurance⁹⁵ and general reinsurance business,⁹⁶ and 5% of the liabilities of the life business for the financial year in respect of long-term insurance⁹⁷ and long-term reinsurance business,⁹⁸ Kenya’s prudential regime provides a mechanism to guard against aggressive growth strategies that could otherwise undermine solvency.

Liquidity Requirements

Liquidity is a core pillar of the Kenyan prudential framework. Upon application for licensing, every insurer or reinsurer is required to deposit with the Central Bank of Kenya the higher of 5 million Kenyan shillings or 5% of total assets.⁹⁹ This deposit must be made in the form of Kenya government securities and is held under lien for the benefit of the IRA, the objective being to require insurers to maintain a buffer of high-quality liquid assets available to meet policyholder obligations and regulatory demands.

Concentration Limits

Kenya’s regime prescribes strict concentration limits on the admissibility of assets for capital adequacy purposes,¹⁰⁰ designed to mitigate risk by preventing excessive exposure to single counterparties or asset classes.

For general insurers, deposits held in any single financial institution or group of related companies must not exceed 10% of total assets;¹⁰¹ the same 10% threshold applies to shares held in any one institution or related group.¹⁰² The admissible limit for property investments is set at 30% of total assets,¹⁰³ while investments in related parties are capped at 10%.¹⁰⁴

Life insurers are subject to a parallel regime, with deposits and shares in any one institution or related group each limited to 10% of total assets.¹⁰⁵ However, the property concentration limit for life insurers is more generous, allowing up to 50% of total assets,¹⁰⁶ while investments in related parties remain capped at 10%.¹⁰⁷

Key Trends and Future Developments

Kenya’s insurance sector is undergoing a rapid transformation, driven by technology, regulatory reform and evolving consumer needs:¹⁰⁸

• Digital innovation is accelerating. Over 70% of insurers now offer digital platforms, and insurtech startups are leveraging artificial intelligence to expand access to insurance products and streamline claims. Key players in the Kenyan banking and telecommunications sectors are expected to play a pivotal role in this development.
• Microinsurance is making significant inroads, offering affordable cover from as little as 40 Kenyan shillings per month, particularly benefiting low-income and rural populations.
• The IRA has licensed five microinsurance companies under the Insurance (Microinsurance) Regulations 2020, with microinsurance business reporting a gross premium income of 2.17 billion Kenyan shillings in 2025.¹⁰⁹ Microinsurance products have been developed across health, agriculture, life and bundled products for micro, small and medium enterprises.¹¹⁰
• Bancassurance is growing rapidly as banks become key distribution partners. Between 2019 and 2023, premiums from this channel grew from 19.5 billion Kenyan shillings to 35 billion Kenyan shillings.
• Agri- and climate-linked products, together with ESG integration, are also gaining prominence, supporting resilience and attracting investment.

Despite these advances, insurance penetration remains at just over 2% of GDP.¹¹¹ Engaging younger consumers continues to present a challenge, with affordability, perceived value, and trust being major barriers. Insurers are responding with bite-sized, pay-as-you-go policies, instant claim settlements, and educational campaigns via social media.

Looking forward, the IRA is reshaping the sector through several key reforms:

• The introduction of Risk-Based Supervision Phase II, which will require insurers to hold capital proportional to their risk exposure, therefore encouraging better risk management.
• The adoption of the global accounting standard IFRS 17, which is now in its third year of implementation.112 The IRA has issued regulatory guidance on technical aspects of the standard and has conducted capacity-building workshops for industry participants.
• The integration of ESG. The IRA issued an ESG reporting toolkit in June 2025 and guidance on principles of sustainable insurance in 2024.¹¹³
• In collaboration with other financial sector regulators, the IRA is in the process of implementing a Financial Consumer Protection Framework which outlines minimum requirements applicable to insurers and other insurance intermediaries, amongst others, with respect to engagement with and protection of retail customers.

These reforms are aimed at enhancing transparency and risk management while at the same time raising operational costs, prompting consolidation and M&A activity as smaller underwriters are acquired by larger players.

Conclusion

The five prudential solvency regimes examined in this chapter reflect a continent in regulatory transition. Each jurisdiction has charted a distinct path and is at a different stage of regulatory development — South Africa through close alignment with Solvency II, Morocco through phased implementation of a risk-based framework, Egypt through post-consolidation reform under the FRA, Nigeria through NIIRA’s three-pillar architecture, and Kenya through a layered hybrid of fixed and risk-based thresholds — but the direction of travel is convergent: moving toward risk-sensitive capitalisation, structured governance and enhanced disclosure.

For international insurers, reinsurers and Lloyd’s syndicates considering or expanding African operations, the practical significance of these reforms is threefold. First, the narrowing gap between African prudential standards and Solvency II reduces the regulatory adjustment required for cross-border market entry. Second, the increasing adoption of group supervision and consolidated reporting — particularly in South Africa and Nigeria — facilitates group capital management across multiple African subsidiaries. Third, higher capitalisation thresholds across all five jurisdictions are likely to accelerate market consolidation, creating both barriers to entry for smaller participants and acquisition opportunities for well-capitalised international groups.

The increasing integration of African markets into the global insurance ecosystem — evidenced, amongst other things, by the growing presence of Africa-linked syndicates at Lloyd’s — underscores opportunity for market participants.

*      *      *

With special thanks to our friends at Webber Wentzel (South Africa), Concordial (Morocco), Matouk Bassiouny & Hennawy (Egypt), Aluko & Oyebode (Nigeria) and Bowmans (Kenya) for their assistance with this chapter.

Senior paralegal Tyron Kerns contributed to this chapter.

_______________

¹ Insurance Act 18 of 2017, as amended by the Financial Sector Laws Amendment Act 23 of 2021.

² Long-Term Insurance Act 52 of 1998; Short-Term Insurance Act 53 of 1998.

³ Financial Sector Regulation Act 9 of 2017.

⁴ Preamble and chapter 2, Insurance Act 18 of 2017; see also the South African Reserve Bank: Prudential Regulation.

⁵ Preamble and section 3, Insurance Act 18 of 2017.

⁶ Sections 63-64, Insurance Act 18 of 2017; see also the South African Reserve Bank: Prudential Standards.

⁷ Chapter 4, Insurance Act 18 of 2017; Sections 5 and 22, ibid.

⁸ Sections 5 and 22, Insurance Act 18 of 2017; Schedule 2, ibid.

⁹ Lloyd’s, South Africa.

¹⁰ Sections 6 and 40-42, ibid.

¹¹ Articles 27-36, Solvency II; see also chapters 5, 6 and 7 of the Insurance Act 18 of 2017.

¹² Insurance Act 18 of 2017, s 36(1).

¹³ Prudential Standard FSI 3 Calculation of MCR.

¹⁴ Ibid.

¹⁵ Prudential Standard FSM 1: Framework for Financial Soundness of Microinsurers.

¹⁶ Preamble, Prudential Standard FSL 1: Framework for Financial Soundness of Lloyd’s.

¹⁷ Prudential Standard FSL 1: Framework for Financial Soundness of Lloyd’s.

¹⁸ Ibid.

¹⁹ Ibid.

²⁰ Prudential Standard FSB 1: Framework for Financial Soundness of Branches.

²¹ Prudential Standards FSB 3: Valuation of Technical Provisions by Branches.

²² Ibid.

²³ Prudential Standard FSI 4; Prudential Standard FSI 5; see sections 35-39 of chapter 6, Insurance Act 18 of 2017.

²⁴ Prudential Standard FSI 5; see also Prudential Standard FSI 4.

²⁵ Prudential Standard FSI 5.

²⁶ Section 36(6)(e), Insurance Act 18 of 2017; see also Prudential Standard FSI 2.3.

²⁷ Section 30, Insurance Act 18 of 2017; see also part 1 of chapter 5, ibid.

²⁸ Prudential Standards GOI 3: Risk Management and Internal Controls for Insurers.

²⁹ Prudential Standard GOI 2: Governance of Insurers; Prudential Standards GOI 3: Risk Management and Internal Controls for Insurers; Prudential Standards GOI 3.1: Own Risk and Solvency Assessment (ORSA) for Insurers.

³⁰ Section 39, Insurance Act 18 of 2017.

³¹ Ibid.

³² Section 9 of the Insurance Act 18 of 2017.

³³ Prudential Standards FSG 1: Framework for Financial Soundness of Insurance Groups.

³⁴ Ibid.

³⁵ Takaful insurance is a form of Islamic insurance that conforms to the principles of Sharia law.

³⁶  Ahmed, Khalil and Hassan, “Factors Influencing Solvency Margin of the Egyptian Insurance Companies,” 2024.

³⁷ See Financial Regulatory Authority of Egypt, “Financial Regulatory Authority (FRA) in the Egyptian Constitution.”

³⁸ Unified Insurance Law No. 155 of 2024.

³⁹ Article 156, Unified Insurance Law.

⁴⁰ Companies Law No. 159 of 1981 (Companies Law).

⁴¹ Article 155, Unified Insurance Law; see Article 2, FRA Decree No. 15 of 2025.

⁴² Article 199, Unified Insurance Law.

⁴³ Article 200, ibid.

⁴⁴ See Aya Anwar, Egypt’s FRA issues new solvency rules to bolster insurance sector stability, 2025.

⁴⁵ “Admissible assets/liabilities” refer to assets/liabilities recognised for regulatory solvency purposes in accordance with the valuation criteria imposed by the FRA.

⁴⁶ See Fahmy and Sobhy, FRA Issues Decree Introducing New Solvency Standards for Insurance Companies, 2025.

⁴⁷ Ibid.

⁴⁸ Ibid.

⁴⁹ See Financial Regulatory Authority of Egypt, “FRA Issues New Rules for Financial Solvency Margin to Enhance Stability of Insurance Sector – Tuesday 5 August 2025.”

⁵⁰ Fahmy and Sobhy, “FRA Issues Decree Introducing New Solvency Standards for Insurance Companies.”

⁵¹ Ibid.

⁵² Article 4, FRA Decree No. 148 of 2025; see also Financial Regulatory Authority of Egypt, “FRA Issues New Rules for Financial Solvency Margin to Enhance Stability of Insurance Sector – Tuesday 5 August 2025.”

⁵³ See Aya Anwar, “Egypt’s FRA issues new solvency rules to bolster insurance sector stability.”

⁵⁴ Qard hasan is an interest-free loan in Islamic finance, carrying no interest or financial return to the lender, and under which the borrower is required to repay only the principal amount.

⁵⁵ Andersen, “Impact of Egypt’s Unified Insurance Law No. 155 of 2024,” 2025.

⁵⁶ The Unified Insurance Law became effective on 11 July 2024.

⁵⁷ See Financial Regulatory Authority of Egypt, “FRA Issues New Rules for Financial Solvency Margin to Enhance Stability of Insurance Sector – Tuesday 5 August 2025.”

⁵⁸ Central Bank of Egypt, “Financial Stability Report,” March 2025.

⁵⁹ National Insurance Commission of Nigeria, “Bulletin of the Insurance Market Performance: A Synopsis of the Insurance Market in the Second Quarter,” 2025.

⁶⁰ Nigerian Insurance Industry Reform Act 2025.

⁶¹ For further reading see Deloitte, “The Nigerian Insurance Industry,” 2025.

⁶² See National Insurance Commission of Nigeria, “Charting a New Course for the Nigerian Insurance Sector.”

⁶³ Section 15(1), Nigerian Insurance Industry Reform Act 2025.

⁶⁴ Section 15(2), ibid.

⁶⁵ Section 15(6), ibid.

⁶⁶ Section 16(1), ibid.

⁶⁷ Section 16(3), ibid.

⁶⁸ Section 16(2), ibid.

⁶⁹ Section 24(1), ibid.

⁷⁰ Section 24(2), ibid.

⁷¹ Section 24(3), ibid.

⁷² Section 23, ibid.

⁷³ Section 15(4), ibid.

⁷⁴ Section 15(5), ibid.

⁷⁵ Section 25(3), ibid.

⁷⁶ Section 8(1), ibid.

⁷⁷ Sections 8(2) - (4), ibid.

⁷⁸ Sections 8(6) - (11), ibid.

⁷⁹ Section 9, ibid.

⁸⁰ Section 110, ibid.

⁸¹ Section 10(b), ibid.

⁸² Section 212, ibid.

⁸³ Paragraph 4, Guidelines for the Collection, Management and Administration of the Insurance Policyholders’ Protection Fund.

⁸⁴ Insurance Act (Cap. 487, Laws of Kenya); The Insurance (Capital Adequacy) Guidelines, 2017.

⁸⁵ Statista Market Forecast, “Insurances – Kenya.”

⁸⁶ Ibid. 87 Guideline 5(4), The Insurance (Capital Adequacy) Guidelines, 2017.

⁸⁸ Section 67C(1)(a), Insurance Act, (Cap. 487, Laws of Kenya).

⁸⁹ Guideline 5(5), ibid.

⁹⁰ Guideline 12, ibid.

⁹¹ Second Schedule (Minimum Capital Requirements), Insurance Act (Cap. 487, Laws of Kenya).

⁹² Paragraph 1(a), ibid.

⁹³ Paragraph 1(b), ibid.

⁹⁴ Paragraph 1(c), ibid.

⁹⁵ Paragraph 1(a)(iii), ibid.

⁹⁶ Paragraph 1(c)(iii), ibid.

⁹⁷ Paragraph 1(b)(iii), ibid.

⁹⁸ Paragraph 1(d)(iii), ibid.

⁹⁹ Section 32(1), Insurance Act (Cap. 487, Laws of Kenya).

¹⁰⁰ Section 41(d), ibid; Guidelines 9(d) and 10, The Insurance (Capital Adequacy) Guidelines, 2017.

¹⁰¹ Guideline 10(1)(a), ibid.

¹⁰² Guideline 10(1)(b), ibid.

¹⁰³ Guideline 10(1)(c), ibid.

¹⁰⁴ Guideline 10(1)(d), ibid.

¹⁰⁵ Guidelines 10(2)(a) and (b), ibid.

¹⁰⁶ Guideline 10(2)(c), ibid.

¹⁰⁷ Guideline 10(2)(d), ibid.

¹⁰⁸ Mayfair Insurance, “6 Big Trends Transforming Kenya’s Insurance Industry in 2025.”

¹⁰⁹ Insurance Industry Report for the Period January – December 2025 Fourth Quarter Release.

¹¹⁰ FinAccess Household Survey Report 2024 - Insurance Regulatory Authority.

¹¹¹ Ibid.

¹¹² Insurance Industry Annual Report 2024 - Insurance Regulatory Authority.

¹¹³ Ibid.

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