Kenya Reinsurance Corporation (Kenya Re) has proposed the establishment of a national flood risk insurance pool under a public-private partnership model, the reinsurer's Managing Director, Dr Hillary Wachinga, has said.
This would gather together Kenya Re as residual reinsurer and scheme administrator, the direct insurance industry, the government of Kenya and capital market participants—particularly ESG-focused investors, he said in a commentary written for the newspaper, The Star.
Under the proposal, all licensed insurers writing property risks would cede their flood exposure to the pool in exchange for standardised, affordable reinsurance cover. The government would provide a sovereign backstop for extreme events and enable a supportive legislative and regulatory framework. Development finance institutions and multilateral partners could contribute capital, technical expertise and climate data.
Dr Wachinga added, “Premiums would be set below full risk-reflective levels to ensure affordability, with the gap funded through an industry-wide levy proportional to market share. Risk would be layered: a first-loss retention funded by premiums; a market layer shared among insurers and Kenya Re; a catastrophe layer transferred to international reinsurers or capital markets; and a government backstop for extreme losses.”
This model is not intended to replace the market, but to enable it to function where it currently cannot. Flood risk in Kenya is too concentrated and volatile for individual insurers to absorb. A pooled structure spreads risk, lowers costs and expands access—ultimately driving uptake.
Flood losses
Kenya has experienced an increasing frequency and severity of flood events. Annual flood losses—both insured and uninsured—range between KES10bn ($77.4m) and KES30bn. Last year, insured flood claims stood at about KES5bn. It is estimated that flood risk erodes about 5.5% of Kenya’s GDP every seven years, Dr Wachinga said.
These risks are expected to rise further due to climate change, rapid urbanisation, increasing asset values, deforestation, settlement in flood-prone areas and inadequate mitigation strategies.