NAIROBI, Kenya — The Insurance Regulatory Authority (IRA) has launched an in-depth review of Kenya’s life insurance sector amid growing concerns that long-term policies are being exploited to launder money and finance terrorism.
The regulator’s move comes in the wake of Kenya’s grey-listing by the Financial Action Task Force (FATF), which flagged weaknesses in the country’s financial oversight systems.
Authorities say the structural features of life insurance products—commonly referred to as long-term business—make them particularly vulnerable to abuse by criminal networks.
“The Authority is conducting a comprehensive money laundering and terrorist financing risk assessment on the vulnerability of the insurance industry,” said Treasury Cabinet Secretary John Mbadi during a briefing to MPs. “This will help identify gaps and support reforms to strengthen our supervisory framework.”
Policies Exploited to Launder Illicit Cash
Officials warn that the 14-day “cooling-off” period allowed in many life insurance policies presents an opportunity for bad actors to inject illicit cash into the system and withdraw it under the guise of refunds.
“Globally, long-term insurance products are more prone to abuse,” said Mary Nkoimu, IRA’s Senior Manager for Prudential Supervision. “Someone can buy a policy, pay the premium, cancel within the cooling-off period, and ask for a refund. This makes it easier to clean dirty money.”
Other loopholes include top-up features, flexible premium schedules, and early surrender options—mechanisms that criminals can exploit to disguise the origins of funds and avoid detection by the Financial Reporting Centre (FRC).
“We’ve seen cases where criminals make small, regular contributions to avoid triggering red flags, then withdraw large sums later claiming them as legitimate proceeds,” Nkoimu added.
Push for Global Compliance
The sector review is part of Kenya’s broader Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) efforts aimed at satisfying FATF conditions and eventually securing the country’s removal from the grey list.
In 2023, IRA’s mandate was expanded to include AML/CFT enforcement powers—allowing the regulator to demand greater transparency from insurers and report suspicious transactions.
Insurance companies are now required to disclose their beneficial owners, a move designed to prevent the use of complex corporate structures to hide the real individuals behind policies.
“We’re seeing increased layering of ownership meant to obscure the true investors in these policies,” Nkoimu noted.
Sector Growth Amid Oversight Gaps
Despite the regulatory concerns, the life insurance market posted strong performance last year.
Gross written premiums rose by 12.5 percent to Sh191.2 billion, while claims and policyholder benefits grew to Sh105.7 billion.
The IRA says the ongoing probe will guide new regulations for the life insurance industry, with the goal of closing loopholes and aligning Kenya’s financial services with international best practices.
