Kenya’s statutory framework for the insurance industry can largely be found in the Insurance Act (Revised 2022); the Marine Insurance Act (Cap 390); the Insurance (Motor Vehicle Third Party Risks) Act (Cap 405); the Insurance Statistics Regulations 1993; the Insurance (Insurance Appeals Tribunal) Rules 2013; and the Insurance (Policyholders Compensation Fund) Regulations 2010. Traditionally, insurance business in Kenya has been categorised under the broad headings of life (long-term) and non-life insurance (short-term). Non-life insurance comprises both compulsory and non-compulsory insurance coverage. Compulsory insurance under these legislative instruments includes motor vehicle third-party liability insurance, workmen’s compensation, aviation liability insurance, marine liability insurance and professional indemnity insurance.

The key players in the statutory and procedural regime include the Insurance Regulation Authority, established under the Insurance Act with the mandate to regulate, supervise, and develop the insurance industry in Kenya. The IRA licences both insurers and insurance intermediaries as prescribed by the Insurance Act. The Association of Kenya Insurers is a key pillar of the industry and brings together 55 members and four associate members. Other players within the context of dispute resolution comprise advocates/lawyers, litigants, and third-party neutrals such as mediators and arbitrators.

The procedural regime is governed by the Constitution of Kenya, 2010, which, at Article 159, vests judicial authority in courts and tribunals, including alternative dispute resolution (ADR), reconciliation, mediation, arbitration, and traditional dispute resolution, provided these are not in contravention of the Bill of Rights, repugnant to justice and morality, or otherwise contravene the Constitution or any written law.

The litigation process in Kenya flows from Article 159 of the Constitution. Parties can approach the Courts through the provisions of the Civil Procedure Act (Cap 21) and Civil Procedure Rules, 2010. The process adopts a common law “adversarial” system of dispute resolution. Essentially, parties can present their case to a court and move it, they serve their counterpart and invite them to participate in the proceedings where each party has an opportunity to provide evidence and witnesses who can be cross-examined. They make arguments supporting their positions and counter those of their opponent, ultimately leaving the judge to decide on the matter.

The Limitation of Actions Act sets the general rules of limitation of actions (Cap 22). Their primary purport is that an action must be taken to court within a prescribed period of time. Any action brought outside of the time limitations is deemed to be time-barred and incapable of being pursued. The courts, therefore, strike it out. Under this Act, torts become time-barred after three years, while contracts’ limitation period is six years and 12 years for actions to recover land. The Public Authorities Limitation Act (Cap 39) adjusts the periods to one year and three years, respectively, for torts and contracts against public authorities.

Other important statutory provisions that outline time limitations include the Competition Act, which, at Section 86, bars any investigations into alleged infringement three years from the date the infringement ceased. Per the Employment Act, the period is three years. Section 35 of the Arbitration Act, for its part, provides a statutory bar against initiating any challenge to a final award, even for a valid reason, where three months have elapsed since the delivery of the final award.

Following the promulgation of the Constitution, ADR has grown and evolved into an important pillar in dispute resolution. The most popular mechanisms include arbitration, mediation, and construction adjudication.

Arbitration is practised under the Arbitration Act of 1995 (amended in 2005) and is counted among UNCITRAL Model Law countries.

Kenya’s Court Annexed Mediation (CAM) Programme was launched in 2016 and is now in more than half of the country’s High Court Stations. The Chief Justice gazetted the Civil Procedure (Court Annexed Mediation) Rules, 2022, under which mediation is practised within the court process. These rules further provide for private mediation and the recognition and enforcement of mediation settlement agreements achieved through private mediation.

Construction adjudication is practised primarily within the construction sector through standard form agreements such as FIDIC. This includes increasing adoption of dispute review boards as a dispute avoidance measure.

While Kenya subscribes to the philosophy that parties have a right to choose the substantive and procedural governing law for their contracts, insurance disputes have been deemed to be commercial contracts connected to Kenya, with the result that the only valid contractual choice is Kenyan law, and the appropriate forum for dispute resolution is Kenyan courts (United India Insurance Co. Ltd, Kenindia Insurance Co. Ltd & Oriental Fire & General Insurance Co. Ltd. C. East African Underwriters (Kenya) Ltd eKLR 1985).

The Foreign Judgments (Reciprocal Enforcement) Act (Cap 43) guides the enforcement of judgments given in other countries, provided the country in question has a reciprocal framework. Kenya has reciprocal enforcement agreements with Australia, Malawi, Rwanda, Seychelles, Tanzania, Uganda, the United Kingdom and Zambia. Where a judgment is made in another country that does not have reciprocal treatment, the same is recoverable as a debt pursuant to common law principles.

The Supreme Court of Kenya in Ingang’a & 6 Others v James Finlay (Kenya) Limited (Petition 7 (E009) of 2021[2023] KESC 22 (KLR)) however, dismissed an appeal for recognition and enforcement of a locus inspection order from a Scottish court determining that decisions of foreign courts and tribunals are not automatically recognised or enforceable in Kenya, as these orders were not final orders per the doctrine of finality. They further adopted the United States doctrine of comity which is to the effect that the recognition of foreign decisions is not out of obligation, but rather out of convenience and utility. The court articulated itself thus: “prioritizing citizen protection while taking into account the legitimate interests of foreign claimants. This approach is consistent with the adaptability of international comity as a principle of informed prioritizing national interests rather than absolute obligation, as well as the practical differences between the international and national contexts.”

Kenyan law predominantly follows common law principles, though the courts tend to interpret statutes, legislation, and common law in a way that is tempered by Kenyan business realities and the cultures of its highly diverse communities. Courts frown upon rewriting parties’ contracts unless there is fraud or undue influence proven (National Bank of Kenya Limited v Pipeplastic Samkolit Kenya Limited & Another (2001) KLR).

A unique feature of litigation procedure in Kenya is that the High Court has unlimited and original jurisdiction. However, the Constitution further established courts of equal status to the High Court being the Environment and Land Court and Employment Labour Relations Court. The High Court is then further split into administrative units that handle niche cases – eg, commercial, tax, admiralty, etc. There are also a large number of subject-matter tribunals in specialist areas – eg, the Insurance Tribunal, Energy, National Environment Tribunal and the like. This, therefore, requires parties to be particularly keen on the forum in which they file their cases particularly since the courts have endorsed an exhaustion of remedies approach (United Millers Limited v The Kenya Bureau of Standards & 5 Others – Supreme Court of Kenya Petition (Application) No 4 of 2021).

Kenyan Courts are generally pro-arbitration and will take steps to enforce arbitration provisions in commercial contracts including those of insurance and reinsurance in pre-arbitration, arbitration and post-arbitration stages. Section 18(2) of the Arbitration Act enables an arbitral tribunal or a party with leave of the arbitral tribunal to seek assistance of the High Court in respect of any power granted to the arbitral tribunal to grant interim relief at Section 18(1). The courts approach this power with restraint and embrace of philosophy of judicial non-interference in arbitral proceedings (Nyutu Agrovet Limited v Airtel Networks Kenya Limited; Chartered Institute of Arbitrators Kenya Branch). Courts will only intervene in a matter where a matter is so grave, so manifestly wrong or has otherwise closed the door of justice to either of the parties (County Government of Meru v Leopard Rock Mico Limited Civil Appeal No E013 of 2023).

Kenya is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the same is domesticated via Section 36(5) of the Arbitration Act effective from the date of ratification, that is to say, 10 February 1989, with a reciprocity reservation. Accordingly, as a contracting state, Kenya must recognise and enforce foreign arbitral awards regardless of their country of origin. This obligation is nevertheless subject to certain limited exceptions aligned to the provisions as set out in the New York Convention itself as well as Kenya’s Arbitration Act.

The Supreme Court of Kenya in Dhanjal Investment Limited v Kenindia Assurance Company Limited stated that arbitration proceedings, like judicial proceedings, are sacrosanct and must be treated with decorum. A significant number of policy agreements contain a dispute resolution clause, predominantly citing a tiered approach comprising negotiation, mediation, and arbitration.

Arbitration is private, and only the concerned parties participate in the process. The general rule of arbitration proceedings tends to rest upon the principle of party autonomy, with the Arbitrator being the master of procedure. The arbitrator adopts those provisions already agreed upon by the parties, effects the procedural rules of the seat, and otherwise ensures that both/all parties are heard and afforded an equal opportunity to prosecute and defend their respective cases.

The Arbitration Act, for its part, outlines the circumstances in which an arbitral award may be set aside and also makes provisions for limited instances of appeal. Appeals are only available in domestic arbitrations where the parties have agreed or where the Court of Appeal grants leave on the basis that the case involves a point of law of general importance that will be likely to affect one or more parties. That said, the pathways to appeal remain very limited, upholding the finality of arbitral awards, but reserving the rights of courts to correct manifest wrong or injustice.

Kenyan courts have observed that the implication of a term is a matter for the court and whether or not it is implied tends to depend on the intention of the parties as deduced from their words of agreement and surrounding circumstances (Bid Insurance Brokers Limited v British United Provident Fund (2016) eKLR).

Per Section 94(1) of the Insurance Act, insurable interest is essential for all policies.

In AIG Insurance Company Limited v Benard Kiprotich Kirui (2022) eKLR, the High Court adopted the definition of insurable interest to be a connotation of pecuniary or proprietary interest determined by (i) a direct relationship between the insured and the subject matter; (ii) the relationship must have arisen out of a legal or equitable right or interest in the subject matter; (iii) the interest bears any loss or liability arising in the event the loss or risk attaches; and (iv) the insured’s right or interest in the subject matter must be capable of pecuniary estimation of quantification.

Thus, prior to the inception of the insurance contract, the insured is required to disclose all material circumstances that the insured knows or ought to know. Essentially, the insured must make a fair representation of the risk to the insurers, codifying the common law principle of uberrimae fidei. In Silverstar Automobiles Limited v Fidelity Shield Insurance Co. Ltd (2014) eKLR the plaintiff’s claim on a burglary policy failed because the High Court examined the Policy plus Proposal and Declaration. The Plaintiff had answered in the affirmative to Question 6, which read, “Do you keep proper Stock and Sale books which are entered regularly not less frequently than once a month?”. They had also accepted the terms and conditions which carried a Safe and Books Clause warranty that the plaintiff would keep a completed set of books, accounts and all business transactions. The court found that the as the plaintiff had not met the warranty, the insurer’s liability was excluded.

The James Finlay cases in Scotland and Kenya’s Supreme Court have opened up new frontiers in relation to the dispute resolution regime established by the Work Injury Benefits Act (Cap 236) aligned towards the doctrine of exhaustion of remedies. In November 2023, the Scotland’s Inner House of the Court Session (highest civil appeal court) halted an “historic” case against an Aberdeen-registered company operating tea farms in Kenya brought by Kenyan tea workers on the basis that their claims could be dealt with under the WIBA regime. The appeal judges indicated that if their understanding of the practical operation of WIBA turned out to be ill-founded, or if the WIBA claims were not determined in accordance with the scheme, or if there were to be excessive delay, the court could revisit the question of substantial justice and consider whether the sist (halt order) should be recalled. The Supreme Court, for its part, received via appeal from the High Court and Court of Appeal seeking recognition and enforcement of a locus inspection order from a Scottish court regarding the tea workers’ claims, which it declined to adopt on the grounds that the same was not a final order. The WIBA Act requires every employer to obtain and maintain an insurance policy with an approved insurer in respect of any liability that the employer may incur under the regime. The Act provides a claims settlement mechanism before the Director of Occupational Safety and Health, an office which is established by the statute on a no-fault basis. Compensation is issued per a defined scale depending on the nature and scale of the injury. In the first instance, the courts do not have jurisdiction to hear the claims, and lawyers are not involved.

Both jurisdictions, in their respective determinations, have cemented the primacy of the doctrine of exhaustion of remedies into the insurance dispute resolution sphere. This doctrine is to the effect that the parties ought to exhaust processes set out under the law before engaging in judicial proceedings (Odhiambo & Another v National Police Service & 3 Others; CIC General Insurance Limited & 6 Others (Interested Parties)(Petition E006 of 2023)[2023] KEHC 719 (KLR)(Constitutional and Human Rights (9 February 2023)(Ruling)).

An insured person is expected to take the following steps in the process of dispute resolution.

• Parties can engage the mechanism set out in their dispute resolution clause. Most insurers set out an arbitration clause preceded by negotiation.
• IRA has a statutory mandate to handle claims, which it does pursuant to Section 204A of the Insurance Act, and it observes the provisions of the Consumer Protection Act. Within the last two years, IRA has issued fines to several insurance companies for failure to pay claims as well as a variety of licences defaults. The Regulator has published the IRA Resolution of Consumer Protection Complaints and Disputes Procedures to the following effect.
1. The claim, complaint or dispute requires to be taken up with the insurance company/registered member in writing and ought also to be granted a reasonable opportunity to respond and issue their decision on the same.
2. The Insurance Regulatory Authority will further require the insured and insurance company/intermediary or service provider to dialogue as disputes may arise out of miscommunication or misinterpretation of policy terms and conditions.
3. Time limits – as a general rule, complaints and disputes should be made to IRA within three years of the act or omission complained about or disputed. Time starts to run from the time when the insured knew or ought to have known about the act or omission. Of importance is that it is unlikely that this would oust the operation of the Limitation of Actions Act.
• Section 169 of the Insurance Act establishes an Insurance Tribunal empowered to hear appeals under the Act, that is say, where a reinsurer declines business under Section 146 and the Commissioner of Insurance’s decisions, Section 173.
• The Tribunal operates under the Insurance (Insurance Appeals Tribunal) Rules, 2013.
• Reinsurance contracts are also subject to the foregoing.

Section 204A of the Insurance Act empowers the Insurance Regulatory Authority to settle disputes. Thus an insurance customer can lodge a written complaint to the Commissioner of Insurance against a regulated entity in respect of the provision of services (Section 204A(2)). The Commissioner’s decision is subject to appeal in the Insurance Tribunal within 30 days.

The Insurance (Motor Vehicles Third Party Risks) Act (Cap 405) requires parties to take out third-party liability insurance in respect of all motor vehicles that belong to them. Section 10 then provides a statutory obligation upon the insurer to settle any judgment in respect of liability attaching, provided appropriate notice is issued in line with the statute. 

Kenya adopts the principle of uberrimae fidei to the effect that one must abstain from bad faith and act in good faith in an insurance contract. This is achieved through disclosure and candour, and misrepresentation or non-disclosure, once established, gives rise to an inference of breach of the uberrimae fidei principle with the potential consequence that the policy may be avoided (James Kamau Kimani v Corporate Insurance Co. Limited (2020) eKLR).

Factors which contribute to late payment of claims include (i) insufficient allocation of funds; (ii) high workload upon insurance workers; (iii) delays in submission of claim; (iv) delays in submission of investigation reports; and (v) delays in claim documentation.

Section 20(1) of the Marine Insurance Act (Cap 390) states that every material representation made by the assured or his agent to the insurer during the negotiations for a marine insurance contract before the contract is concluded must be true; if untrue, the insurer could avoid the contract. Accordingly, any insured under a marine policy is bound by representations made by their broker.

Such representations could be of fact or expectation of belief, where made in good faith. The materiality of the representation matters where it would influence a prudent insurer on the value of premium required; what is material is a matter of fact. Representations can be withdrawn or corrected before the contract is concluded.

While insurers do delegate underwriting or claims to third parties, thus far this question has not been actively litigated upon. The caution under this model is for the insurance companies to ensure that such third parties carry out their business well, comply with regulations and treat customers right. Questions of conflict of interests may also arise and therefore insurers ought to ensure sufficient checks and balances.

The main areas where insurers fund the defence of insureds are under general business (non-life) insurance, especially those claims emanating from statutory covers – eg, third-party motor vehicle liability and marine insurance.

It remains to be seen if there are any changes in the future regarding funding the defence of insureds.

As business complexity increases, the cost and complexity of litigation under these heads may increase.

An increasing number of insurance companies are offering contingent risks covers in respect of legal risks arising from litigation, tax liability and regulatory issues. These hinge on an understanding of the factual and legal circumstances surrounding each case, an assessment of the potential of the risk attaching, as well as an estimate of the loss likely to be suffered.

As a general rule, the principle of subrogation is triggered when the insured is indemnified in respect of their rights. The court in Jonathan Kyangu Kisilu and Mary Nzioki Kyalu (suing as the legal representatives of the Estate of Kyaluma Kyangu (Deceased) v Mombasa Fresh Company & 2 Others (2021) eKLR, held that where the insurer came into the proceedings prematurely, its representative’s affidavit in support of the application before the court was fatally defective for having been sworn by a stranger to the proceedings leading to its being struck out.

To avoid falling into the trap set out at 6.1 Right of Action to Recover Sums From Third Parties, insurers will fund their insured’s defence/prosecution of a claim but ensure that the proceedings are carried out in the name of the insured and legal documents are filed in the insured’s name and for and on their behalf.

The COVID-19 pandemic, a prolonged season of drought, the global economic slowdown, and a general election in 2022 saw the newly elected regime introduce a universal healthcare coverage system through a triad of statutes: the Social Health Insurance Act, 2023, Primary Healthcare Act, 2023, and Digital Health Act, 2023, which collectively replaced the National Hospital Insurance Fund Act, 1998 (Amended in 2022). The Triad was intended to establish a universal healthcare system accessible to all. However, the Acts were declared unconstitutional by a three-judge bench in July 2024. The court, however, granted the government 120 days to implement the court’s ruling and afforded the attorney general the same period to file an appeal, primarily on the premise that there now exists a lacunae in the country’s health insurance regime.

The outcome of the case mentioned in 7.1 Type and Amount of Litigation, is bound to affect health insurance, and depending on the ultimate outcome, it may spark a reorganisation in the sector that could invite increased health insurance-related litigation.

Any test cases will likely emerge following the outcome of the constitutional petition relating to the social health insurance framework which is currently before the courts.

The scope of insurance cover available has not yet been changed, nor has the appetite for risk.

Kenya, like a few other African countries such as Nigeria and Ghana, engaged regulatory consultants to assess the current status and regulatory practices in the respective jurisdiction with reference to ESG risks. The outcome was to the effect that African insurers do not typically consider ESG risks in underwriting, capital management and risk management decisions largely due to a lack of regulation, policy and voluntary initiatives.

It is important, however, to underscore that the country made a commitment to a nationally determined contribution (NDC) target of decreasing greenhouse gas emissions of 32% by 2030 at a total estimated cost of USD62 billion. The Central Bank of Kenya (CBK) has since issued a Guidance on Climate-Related Risk Management, considering the financial sector’s role in addressing climate change with limited success. CBK further publicised the draft Kenya Green Finance Taxonomy, 2024 (KGFT) for public participation. This aims to establish a system for banks, issuers, and other financial sector participants to track, monitor and demonstrate the credentials of their green activities in an objective and credible way and stamp out greenwashing. The KGFT is couched in voluntary terms, but will likely have a significant impact on shaping the ESG discourse in Kenya’s financial sector, including insurance underwriting and litigation.

Kenya’s data protection landscape came into effect on 25 November 2019, with the enactment of the Data Protection Act No 24 of 2019. Several regulations further came into operation on 31 December 2021 through the Data Protection (General) Regulations, 2021; the Data Protection (Registration of Data Controllers and Data Processors) Regulations, 2021; and the Data Protection (Complaints Handling and Enforcement Procedures) Regulations, 2021. The DPA created the Office of the Data Protection Commissioner (ODPC), with powers to impose fines and sanctions for offences that are also articulated in the DPA regime.

The High Court has articulated that the ODPC has the power to receive, investigate and handle complaints leading to an award of compensation to victims in suitable cases (Mercy Mwikali Mwanzia v Allan J. Rhodes (Constitutional Petition No E115 of 2022)[2023]). However, only natural persons can lodge complaints with the OPDC. Further, the ODPC is required to finalise complaints within the statutory period prescribed by statute (Gichuhi & 2 Others v Data Protection Commissioner; Mathenge & Another (Interested Parties)(Judicial Review No.E0238 of 2023)).

The Anti-Money Laundering and Combating Terrorism Financing (AML/CTF) Laws (Amendment) Act 2023 came into effect on 15 September 2023. It amended a number of Acts, including the Insurance Act. The Amendment Act granted supervisory powers to regulators in the financial services sector, including IRA. The upshot of the impact will be discernible once IRA issues its guidance on the same.