RELIEF

State fund starts compensating clients of collapsed insurers

2,949 Concord policyholders are set to receive compensation

In Summary
  • This marks Kenya’s first insurance claims payout for policyholders and claimants of insurance companies that have been wound up.
  • This development follows IRA’s proposal to amend the Finance Act 2019 which stated that policyholder’s compensation was to be affected after liquidation.
Godfrey Kiptum, Commissioner of Insurance and CEO Insurance Regulatory Authority, Nelson Gaichuhie, CAS National Treasury and John Nthei pose with a Concord insurance beneficiary in Nairobi on August 18, 2021
Godfrey Kiptum, Commissioner of Insurance and CEO Insurance Regulatory Authority, Nelson Gaichuhie, CAS National Treasury and John Nthei pose with a Concord insurance beneficiary in Nairobi on August 18, 2021
Image: CHARLENE MALWA

 

Clients who lost millions of shillings after Concord Insurance Company collapsed have started receiving payments from the Policyholders Compensation Fund(PCF).

The Fund on Wednesday made a payment of Sh390 million to 30 claimants who held policies with the firm that was wound up in 2013.

It marks Kenya’s first insurance claims payout and the first phase of compensation for policyholders and claimants of insurance companies that have been wound up.

The maximum amount of compensation payable is set at Sh250,000, and should be claimed within two years by the 1,570 Concord policyholders.

“We are appealing to the rest of the claimants to lodge their claims before the two year period lapses, because after this all funds will go to the Unclaimed Financial Assets Authority,” said National Treasury Chief Administrative Secretary Nelson Gaichuhie.

He said PCF has promoted confidence in the insurance sector by providing a cushion to consumers of insurance services in the unlikely event of a company closing down.

“The Government has enhanced the mandate of the Fund to participate in statutory management and liquidation of insurance companies that have been placed under statutory management by Insurance Regulatory Authority,” Gaichuie said.

He said this is aimed at ensuring prompt compensation to claimants of insurance companies placed under Statutory Management and protection and preservation of assets of these companies.

PCF managing trustee and CEO, William Masita said the Fund set aside Sh1 billion for compensation of policyholders in the 2021/2022 financial year which is the first phase of the compensation.

Other insurance companies that have been wound-up include United Insurance Company, Standard Insurance Company, and Blue Shield Insurance Company.

They were put under receivership but shareholders and the regulator have engaged in endless court cases leaving policyholders to go for decades without recovering their money.

“We are also in the process of verifying and preparing compensation claims for three other companies namely Standard Assurance limited, United Insurance Company limited and Blue Shield Insurance Limited whose compensation payments will be rolled out in the near foreseeable future,”he said.

The Policyholders Compensation Fund commenced its operations in January 2005 and its creation was aimed alleviating loses encountered by policyholders and claimants as well as protect assets of companies placed under statutory management.

The government later elevated the Fund to a semi-autonomous State Agency with its own Board of Trustees and with sufficient resources to participate in statutory management and liquidation of insurance companies wound up by Insurance Regulatory Authority.

“While this is a success, we have to note the delay and assure policyholders affected that we are currently in discussion with the official receiver in the AG’s office to accelerate the process of liquidation to benefit policyholders,” said The Commissioner of Insurance and Insurance Regulatory (IRA) CEO Godfrey Kiptum.

This follows IRA’s proposal to amend the Finance Act 2019 which stated that policyholder’s compensation was to be affected after liquidation.

The Finance Bill 2020 now states that compensation happens immediately the company is placed under statutory management.

Insurance companies contribute to PCF through the payment of a levy equivalent to 0.25 per cent of their premium receipts and has amassed Sh13.5 billion by December last year.

Kenya's first insurance payout beneficiaries under statutory compensation line up to receive their cheques by Concord insurance company at Crown Plaza on August 18, 2021
Kenya's first insurance payout beneficiaries under statutory compensation line up to receive their cheques by Concord insurance company at Crown Plaza on August 18, 2021
Image: CHARLENE MALWA