United Insurance customers to gain from revival plan

Insurance Regulatory Authority chief executive Sammy Makove. IRA has appointed a caretaker board to oversee revival of United Insurance Company, which has been under statutory management for the past eight years. Photo/FILE 

By GEORGE NGIGI

In Summary

• The re-opening will offer a reprieve for policyholders whose claims estimated at Sh2 billion have remained unpaid since July 2005, when the company was put under statutory management by the Insurance Regulatory Authority (IRA) which also froze payments of claims.
• Commissioner of Insurance Sammy Makove said he had ascertained that the company’s assets could cover for its liabilities, meaning that the policyholders and insurance beneficiaries were fully covered.

The insurance sector regulator has appointed a caretaker board to oversee revival of United Insurance Company, which has been under statutory management for the past eight years.

The board is expected to oversee handover of United Insurance from statutory managers to the caretaker board over the next six months.

The re-opening will offer a reprieve for policyholders whose claims estimated at Sh2 billion have remained unpaid since July 2005, when the company was put under statutory management by the Insurance Regulatory Authority (IRA) which also froze payments of claims.

“The appointment of the caretaker board is for oversight purposes and is aimed at putting in place operational structures in anticipation of the revival of the company,” said Commissioner of Insurance Sammy Makove.

He said he had ascertained that the company’s assets could cover for its liabilities, meaning that the policyholders and insurance beneficiaries were fully covered.

The company has been selling huge tracts of land to raise cash for the turnaround.

This is the first time that a caretaker board is being appointed to oversee a company that is still under statutory management.

Invesco Insurance Company, the only other insurer to have been revived from statutory management was bought by Matatu Owners Association that injected fresh capital to make it a viable business.

United Insurance was a majority underwriter of public service vehicles and went under due to mismanagement and high claims from public service vehicles (PSVs).

Reforms of the public transport sector, commonly referred to as Michuki rules, have helped shelter insurers from heavy claims though the industry appears to be slipping back to the old ways. Other insurers currently under statutory management include Blue Shield, Concord and Standard Alliance, all of which had significant cover of PSVs.

In 2009, Kenya Re, the statutory managers of United Insurance, had proposed the winding up of the firm, a move that was opposed by shareholders in court.

Winding up would have allowed the unpaid claims to be settled by the policyholders’ compensation fund while other creditors would have received payments from sale of the company’s assets.

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Policyholders will not have to wait this long in future to receive payment for their unpaid claims following amendments in the Insurance Act introduced this year.

The changes allow the policy holders Compensation Fund to pay claimants as soon as a company is declared insolvent unlike in the past were the fund could only settle claims after a firm had been wound-up by the statutory manager.

The industry is currently enacting new laws that will be divided into two Acts, one creating the regulatory body and the other governing the industry operations