The Law Society of Kenya (LSK) wants a section of the law which gives the insurance regulator sweeping powers to appoint receiver managers for failed companies declared unconstitutional.
LSK claims that Section 67 of the Insurance Act, which empowers the Commissioner of Insurance to appoint a statutory manager to take over financially troubled insurance firms, is unconstitutional. The lawyers argue that the law has a loophole which has been exploited by the commissioner and the Insurance Regulatory Authority (IRA) to install statutory managers and moratoriums on claims payments for infinite periods.
LSK claims that the law does not set out when and how the powers of the managers can be challenged thereby depriving the public, policy holders and creditors access to justice and deprived them their economic interest.
“A declaration that Section 67 (2) (i), 67C (3) and 67C (10) of the Insurance Act are unconstitutional and contravene articles 40, 46, 47, and 50(1) of the Constitution,” reads one of the orders sought by LSK.
The petition lists the Commissioner of Insurance, IRA, policy holders’ compensation funds, and the attorney general as respondents. LSK says many of its members represent accident victims, insurance companies in defending the claims and recoveries, and other stakeholders.
But due to infinite statutory conditions, it alleges, the victims are unable to get compensation, lawyers deprived of their legal fees, shareholders are unable to get back their investment, and public confidence is eroded.
LSK claims lists United Insurance, Concord Insurance, Standard Assurance Company and BlueShield Insurance as some of the companies that have remained under statutory management for many years.
The AG has opposed the application arguing that the section provides for the maximum duration of 12 months for a statutory manager which is extended only by court.
The AG says that parties have an opportunity to oppose the application of extension of moratorium in court.
But the firm claims that the manner in which the extension of moratorium is done is devoid of public participations and lack public interest. It casts doubts on the performance of the regulator claiming that only one company, Invesco Assurance Company has successfully been brought back to operations.
Court filings shows already a company which claim to be a shareholder of United Insurance Company has applied to be enjoined as interested party.
The company claims it has been kept out of their company with no update for 12 years that it has been in receivership.
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