Agony as Resolution Insurance sinks with over Sh6.5 billion

Resolution Insurance has collapsed with over Sh6.5 billion clients' funds, nearly nine years since the last underwriter, Concord Insurance, collapsed in 2013. 

According to the Insurance Regulatory Authority (IRA), the majority of the clients affected by the collapse are medical customers who account for 90 per cent of the policyholders.

“Resolution Insurance owed creditors, had incurred claims worth Sh2.5 billion, and had collected premiums worth Sh4.1 billion as of December 31, 2020. The majority around Sh3.5 billion comes from medical business,” the IRA said.

The IRA attributed the collapse to a failure by the underwriter's shareholders to recapitalise the business.

Recapitalization is the process of restructuring a company's debt and equity often in an attempt to stabilize its capital structure.

The collapse of insurance firms in Kenya dates back to 2005 when the sector started experiencing a spate of collapses prompting the formation of the Policyholders Compensation Fund (PCF).

Among notable collapses include the United Insurance in 2005, Standard Assurance in 2009 and Blueshield in 2011.

The PCF was formed to cushion holders of insurance policies where companies are unable to meet their obligations.

But even then, PCF has capped compensation to policyholders at Sh250,000 for each client.

Policyholders and creditors with higher value claims will wait for the liquidation of the business to see how much more they can recover.

In the meantime, clients with medical bills will have to contend with paying out of pocket.

The other batch of clients largely exposed following the collapse include industrial property and motor vehicle owners who now need to urgently seek alternative insurance policies to safeguard their businesses.