Ouko faults picking of Blue Shield statutory manager

Blue Shield was placed under statutory management in 2011. PHOTO | FILE 

By BRIAN WASUNA, bwasuna@ke.nationmedia.com

In Summary

• The Auditor-General says the Commissioner of Insurance Sammy Makove appointed Eliud Muriithi without giving documents to prove that he was the best candidate for the job.

Auditor-General Edward Ouko has questioned the appointment of Eliud Muriithi, who has been accused of mismanaging collapsed Blue Shield Insurance’s assets in his two and a half year tenure, as statutory manager.

The Auditor-General says in a report on Blue Shield’s management that when it was placed under statutory management that the Commissioner of Insurance Sammy Makove appointed Mr Muriithi without giving documents to prove that he was the best candidate for the job.

The report has also faulted Mr Muriithi and his successor — Policyholders Compensation Fund (PCF) — who collectively spent Sh491.4 million in the five years they managed Blue Shield, which is higher than the Sh477 million they collected in rent from the underwriter’s Upper Hill tower.

Mr Ouko in the report adds that Mr Makove failed to produce supporting documents to justify the Sh1.2 million monthly salary paid to Mr Muriithi from the collapsed underwriter’s coffers which the former Blue Shield statutory manager increased to Sh1.6 million in December 2012 without justification.

The audit on Blue Shield was ordered by Director of Criminal Prosecutions Keriako Tobiko, following claims by the underwriter’s shareholders that receiver managers have diverted Sh200 million from the firm.

Mr Ouko’s report has put Mr Makove, Mr Muriithi and PCF’s representative John Keah on the spot for several irregularities.

The report adds that Blue Shield’s receiver managers may have dug into the underwriter’s call deposit accounts to sustain their heavy expenditure, a move that could have bled the firm dry.

“There was no documentary evidence indicating the criteria used for the appointment of Mr Muriithi, how he was evaluated among other potential statutory managers to assure that he was the most qualified and competent. Further, no criterion was availed [sic] indicating how the remuneration of the statutory manager was determined.”

Mr Ouko said “we were not able to ascertain whether he was the most qualified and competent statutory manager and therefore could not establish whether the remuneration of Sh47.2 million paid to him was commensurate to his competence.

Blue Shield was placed under statutory management on September 16, 2011 after several years of complaints by clients whose claims had been delayed.

READ: Court gives regulator nod to wind up Blue Shield

The firm was the biggest insurer of PSVs — matatus and motorcycles — by the time it was taken over by the regulator. The underwriter’s life insurance arm — Shield Assurance — was acquired by British firm Prudential Plc for Sh1.5 billion in 2014.

Mr Makove appointed Mr Muriithi to run the collapsed underwriter who was replaced by State-owned PCF in July 2014.

“The Commissioner of Insurance has abused the statutory provisions to arbitrarily deprive the shareholders their property of interest,” says Apollo Mboya, the shareholders’ lawyer.