Kenya Re Denies Sh3.39 Billion ARM Cement Investment as Regulator Stands Firm

A sharp dispute has broken out between the Insurance Regulatory Authority (IRA) and state-controlled Kenya Re over official regulatory data indicating that the reinsurer purchased a Sh3.39 billion stake in the collapsed cement manufacturer, ARM Cement.

The high-profile disagreement highlights crucial questions surrounding the accuracy, transparency, and auditing of statutory financial filings submitted by institutional investors within Kenya's dynamic financial sector.

The regulator's six-month report through June attributed a major portion of the reinsurance sector's expanding equities portfolio to the multi-billion-shilling transaction.

However, the revelation has caused bewilderment and widespread market speculation, given that the Nairobi Securities Exchange (NSE)-listed cement maker collapsed into liquidation following severe debt distress.

Kenya Re has flatly denied executing any such trade, highlighting potential reporting discrepancies and raising serious questions about where the Sh3.3 billion was truly deployed or how the ledger entry materialised in official regulatory documentation.

Nicodemus Gekone, head of property and investments at Kenya Re, firmly rejected the regulator's findings, affirming that the state-backed reinsurer has no ties whatsoever to the defunct manufacturer.

“That is not accurate. We have not acquired any ARM Cement shares,” Gekone said, as quoted by Business Daily. “I am in charge of investments and I am saying so without any fear of contradiction. We are going to write to IRA.”

Despite the fierce pushback from the reinsurer's executive suite, the IRA stood firmly behind its half-year figures.

Authority Chief Executive Godfrey Kiptum maintained that the published report simply mirrors the unaudited statutory filings submitted directly and formally by the reinsurer itself.

“That is how it is. It is what they filed with us. Whose report is it? It is my [IRA] report, and I am the one telling you so. Let them deny,” Kiptum said, noting that regulatory filings are not modified without mutual agreement between the supervisory body and the reporting entity.

To understand the profound bewilderment surrounding the reported multi-billion-shilling allocation, one must examine the turbulent history of ARM Cement.

Once standing proudly as Kenya’s second-largest cement producer, the company was suspended from the Nairobi Securities Exchange in 2018 under the crushing weight of a Sh20 billion debt burden.

Its operational assets were eventually acquired by National Cement for Sh5.05 billion, leaving ordinary shareholders and institutional creditors with substantial write-offs.

The sheer impossibility of acquiring a Sh3.39 billion stake in a company that has been locked in winding-up proceedings has forced market analysts and fund managers to scrutinize alternative explanations.

Industry observers have speculated whether the capital could have been directed toward other state-backed initiatives, drawing parallels to earlier market pressures where state-owned entities were nudged to support capital market activities, such as the Kenya Pipeline Company initial public offering amid lukewarm retail investor interest.

According to the regulator's report, total reinsurance holdings in listed equities surged remarkably from Sh1.35 billion to Sh6.32 billion over the period under review.

This exponential jump underscored a dramatic shift in how reinsurers allocate their vast capital reserves, moving aggressively back into the capital markets as economic recovery indicators gained traction.

The controversy coincides with a broader resurgence in the insurance sector’s appetite for equities. Driven by a robust rally at the Nairobi bourse, the industry's total exposure to quoted shares jumped to Sh56.48 billion by the end of June, up from Sh30.57 billion recorded during the same period last year.

This stellar expansion lifted the proportion of quoted shares in total industry investments to 3.4 per cent, marking a four-year high, with reinsurers posting the largest individual allocation at 6.1 per cent.

While reinsurers dominated headlines due to the ARM Cement data dispute, life underwriters spearheaded the broader equity push across the entire financial sector.

Combined portfolios for life insurers surged from Sh25.35 billion to Sh43.53 billion during the period. Leading industry players, specifically ICEA Lion Life Assurance, Jubilee Life Insurance, and Britam Life Insurance, generated roughly 75.3 per cent of the total growth observed in listed shareholdings.

Despite these aggressive capital deployments into the stock market, equity allocations remain well below the historical 20 percent benchmark witnessed a decade ago.

Nevertheless, rebounding market valuations continue to entice institutional insurers seeking higher yields beyond traditional fixed-income securities and government bonds.

A steady rise in equity allocations indicates insurance companies are seeking capital growth while keeping their broader investment portfolios well-balanced against macroeconomic volatility.