Implementing Risk-Based Solvency for Insurers—Lessons from Kenya, Mexico, and South Africa

Implementing Risk-BasedSolvency for Insurers—Lessons from Kenya,Mexico, and South Africa Peter Windsor, Suzette Vogelsang, with Christiaan Henning,Kerwin Martin, Elias Omondi, Gerardo Rubio, and JoosteSteynberg WP/24/240 IMF Working Papersdescribe research inprogress by the author(s) and are published toelicit comments and to encourage debate.The views expressed in IMF Working Papers arethose of the author(s) and do not necessarilyrepresent the views of the IMF, its Executive Board,or IMF management. 2024NOV IMF Working Paper Monetary and Capital MarketsDepartment Implementing Risk-Based Solvency for Insurers—Lessons from Kenya, Mexico,and South Africa Prepared byPeter Windsor and Suzette Vogelsangwith Christiaan Henning, Kerwin Martin, Elias Omondi,Gerardo Rubio,and Jooste Steynberg Authorized for distribution byJay SurtiNovember2024 IMF Working Papersdescribe research in progress by the author(s) and are published to elicitcomments and to encourage debate.The views expressed in IMF Working Papers are those of theauthor(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. ABSTRACT:International standards andbest practisesupports the implementation of a risk-based solvencyregime in the regulation and supervision of insurers.Severalemerging market and developing economiesaretransitioningtosucha solvency regimeor planning to do so. This paperdiscussesKenya, Mexico,and SouthAfrica’s journey toputting in place a risk-based solvency regime which had several common elementsnotwithstanding significantly different insurance sectors. Thetransitionwas a multi-year project requiringdedicatedadditionalresources;restructuring of the regulator, including redesigning supervisory processes andtoolsand upgradinginformation technology systems;and significantly greatercoordination between theregulator and the insurance industry. RECOMMENDED CITATION:[Start Typing Here] Implementing Risk-BasedSolvency for Insurers—Lessonsfrom Kenya, Mexico,and SouthAfrica Prepared byPeter Windsor and Suzette Vogelsang, with ChristiaanHenning, Kerwin Martin, Elias Omondi,Gerardo Rubio,and JoosteSteynberg Contents Introduction.........................................................................................................................................................5 Overview of the Insurance Industry in Kenya.................................................................................................8Prior to RBS.................................................................................................................................................13Regulation and Supervision...................................................................................................................13The Regulator........................................................................................................................................16The Journey to RBS.....................................................................................................................................17Key Lessons from the Project......................................................................................................................20What was Implemented................................................................................................................................21Conclusions..................................................................................................................................................21 Implementing Risk-Based Solvency in Mexico..............................................................................................23 Overview of the Insurance Industry in Mexico..............................................................................................23Prior to RBS.................................................................................................................................................32Regulation and Supervision...................................................................................................................32The Regulator........................................................................................................................................34The Journey to RBS.....................................................................................................................................37Key Lessons Learnt......................................................................................................................................46Conclusions and Advice...............................................................................................................................48Reasons and Objectives........................................................................................................................48Existing Conditions..................................................................................................