The insurer was was put under statutory management on September 16, 2011. Photo/FILE
What you need to know:
Blue Shield Insurance Company owners are supposed to raise Sh597 million to lift the firm out of insolvency and another Sh23 million for liquidity.
The injection takes into account the position that the company owns the property including its headquarters and land in Upper Hill Nairobi valued at Sh1.7 billion according to filings with the IRA.
The company was put under statutory management on September 16, 2011 as it reached a point where it could no longer pay claims due to lack of liquidity.
Insurance industry regulator is expected to recommend reopening of Blue Shield Insurance Company, which collapsed in September 2011, on condition the shareholders inject capital to the tune of Sh620 million.
According to people familiar with Insurance Regulatory Authority (IRA) interactions with the owners, they are supposed to raise Sh597 million to lift the firm out of insolvency and another Sh23 million for liquidity.
The injection takes into account the position that the company owns the property including its headquarters and land in Upper Hill Nairobi valued at Sh1.7 billion according to filings with the IRA.
Statutory management
It is understood that attempts have been made to ensure the company does not lose control of crucial assets such as the Upper Hill land, whose title deed has been charged and placed in a safe deposit box with a commercial bank.
The company was put under statutory management on September 16, 2011 as it reached a point where it could no longer pay claims due to lack of liquidity.
The company was also technically insolvent as its liabilities exceeded assets by hundreds of millions of shillings. At the time of the administration in 2011, the firm had just moved into the new building in Upper Hill.
It turned out that the company had been having problems since 2009 and the regulator had made efforts to restore its business.
Traceable asset
Court records show there was an attempt in 2009 to hive off the building to become the asset of the life insurance business under Shield Assurance, but the effort was abandoned for unknown reasons.
The title deed, the key traceable asset that could hold the key to revival was put in the bank in 2011 due to fears that it could fall in the wrong hands.
Blue Shield Insurance and Shield Assurance are subsidiaries fully owned by Blue Shield Holding Company.
An audit report for the year 2010, shortly before the company collapsed, indicated there was reduction in the book value of property and equipment by Sh367 million (apparently the disposal of its headquarters) but it turned out that no asset sale had taken place in the course of that year. In any case, the building was supposed to be worth more than that.
Documents also show that in 2009, the regulator appointed three statutory directors to the board of the company to assist it to restructure, improve corporate governance and provide strategic direction.
However, the directors were unable to provide the expected service and soon resigned as the company continued to face difficulties in honouring claims.
The directors of the company sought court intervention in 2010 to protect it from paying claims and creditors, citing fraudulent claims that it needed to investigate. The IRA entered the fray and placed it under statutory management.
An audit of the company for the period up to end of December 2013 has now revealed there are pending issues that need to be resolved, some involving the input of shareholders and previous auditors.
Assets amounting to Sh697 million could not be admitted as belonging to the company because they could not be authenticated.
An attempt to establish the status of some of the assets such as leases, land and vehicles was fruitless as it emerged that they had been registered in other people’s names.
Change of ownership
Whereas the assets might have been bought using the company’s money, it was unclear what might have transpired in the subsequent years to warrant change of ownership.
The company also has tax liabilities of more than Sh100 million, outstanding claims totalling more than Sh2.2 billion.
Creditors are owed more than Sh200 million while the firm’s pension scheme is owed Sh222 million. Outstanding premiums amount to Sh102 million.
Previously, the statutory management plan has been extended several times. After being placed under the IRA in September 2011 for a year, the court, in 2012, extended the period to September 2013 which was again extended to November and yet again in January this year.
The IRA is expected to be in court over the statutory management of the company on March 28 although it is not known what specific matters are likely to arise.
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