NAIROBI, Kenya – The National Treasury has proposed tough new rules limiting how long external auditors and actuaries can serve insurance companies, in a move aimed at tightening oversight and boosting confidence in the multi-billion-shilling sector.
The draft Insurance (External Auditors and Appointed Actuaries) Regulations, 2025, published under the Insurance Act, seek to cap the tenure of audit partners, managers and staff at four consecutive years, while the audit firm itself would be restricted to eight years.
Once that period lapses, the firm would be barred from re-engagement with the same insurer for at least three years, effectively introducing one of the strictest auditor rotation frameworks in Kenya’s financial sector.
“The objectives of these regulations are to ensure there is a reliable financial reporting framework and clearly defined roles and responsibilities of the board, management, external auditor and appointed actuary,” the Treasury said in the draft notice.
The proposed rules would apply to all insurers, microinsurers, appointed actuaries and external auditors, and are designed to enhance transparency and guard against fraud or financial misstatement in an industry that manages billions of shillings in policyholder funds each year.
Tighter Oversight Than Other Sectors
Unlike the banking sector, where Central Bank of Kenya (CBK) guidelines limit the tenure of audit partners to five years but allow audit firms to serve longer, the proposed insurance regulations would impose a hard stop for both individuals and firms.
Under the Companies Act, most non-financial companies have no mandatory auditor rotation period, leaving the decision to shareholders during annual general meetings.
If adopted, the Treasury’s proposal would place the insurance sector under stricter governance rules than banks and listed firms, signalling heightened concern about accountability in the industry.
Lessons from Past Financial Failures
Efforts to limit auditor tenure are not new in Kenya’s financial system. In 2016, then-CBK Governor Dr Patrick Njoroge floated a proposal to restrict banks’ external auditors to a three-year term following the collapse of Dubai Bank, Imperial Bank and Chase Bank, which exposed weak oversight and audit lapses.
However, that proposal was never enacted into law. The Treasury’s latest move, by contrast, goes further by explicitly prohibiting reappointment within three years and demanding that hired firms have at least five years of insurance auditing experience.
If approved, the regulations could reshape financial reporting in the insurance sector, ensuring greater accountability for boards and management while providing stronger safeguards against misstatements or manipulation of policyholder funds.
