Kenya Pipeline risks losing Sh224m in insurance claim


EnviroServ, the company cleaning oil-polluted Thange River in Makueni County, technical manager Nicholas Kipchirchir gestures as he makes a point to Makueni Senator Mutula Kilonzo Junior (right) and Kenya Pipeline Company Managing Director Joe Sang at an inspection trench near the condemned river on July 5, 2017. PHOTO | PIUS MAUNDU | NATION MEDIA GROUP

The Auditor General says Kenya Pipeline Company (KPC) risks losing Sh224.3 million insurance compensation claim for the costs it incurred in cleaning up a river after oil spillage.

KPC spent Sh224.3 million in cleaning up River Thange in Makueni County after the oil spillage in 2015 disrupted lives of thousands of people living around the river.

Auditor General Nancy Gathungu says even though KPC has included this figure in its Sh9 billion receivables, recoverability of Sh224.3 million is in doubt after the insurance company disputed the claim.

KPC in 2013 took an industrial and other risk policy cover, at an annual premium of Sh151.4 million ($1.405million) through an insurance brokerage firm.

The oil company had lodged an insurance compensation claim stating that the oil spillage was insurable risk covered in the policy.

“Upon KPC lodging a claim for compensation with the underwriting firm, the underwriter asserted that in their opinion, the risk fell within the exclusion clauses as normal wear and tear,” says Ms Gathungu in the latest audit report on KPC.

Ms Gathungu adds that KPC has not sought any clarification from the Insurance Regulatory Authority for an independent interpretation or arbitration.

Instead, Ms Gathungu explains, KPC has continued to engage the underwriter through meetings and correspondences most of which were never responded to.