- The Insurance Regulatory Authority (IRA) said they have began processing claims of Concord insurance which collapsed eight years ago and will move to Standard insurance company.
- The Insurance regulator said it is tapping into the Policyholders Compensation Fund (PCF) set up 16 years ago for the first time to settle claims of the failed insurer, opening the way to pay back claims for other insurers.
The insurance regulator has started making Sh250,000 payout to policy holders and beneficiaries of collapsed insurers, making the first compensation in decades.
The Insurance Regulatory Authority (IRA) said they have began processing claims of Concord insurance which collapsed eight years ago and will move to Standard insurance company.
The Insurance regulator said it is tapping into the Policyholders Compensation Fund (PCF) set up 16 years ago for the first time to settle claims of the failed insurer, opening the way to pay back claims for other insurers.
“This is the first time since its establishment that the Fund is compensating policy holder claims for insolvent insurance companies. The maximum compensation payable by the Fund on any one claim lodged by a claimant is Sh250,000,” PCF Managing Trustee William Masita said.
The regulator said it has so far received claims from 1,572 beneficiaries of Concord insurance which puts their estimated payout of Sh392 million. They however expect more claims.
“We have started with Concord and Standard insurance because their matters have been concluded, the others are still in court and we hope they shall soon be resolved,” the Commissioner of Insurance Godfrey Kiptum said.
Thousands of policyholders in collapsed insurance firms have waited years to receive their payouts even after the Fund was set up in 2005 to cushion holders of insurance policies in the event that companies are unable to discharge their services.
Insurance companies contribute to PCF through the payment of a levy equivalent to 0.25 percent of their premium receipts and has amassed Sh10.6 billion in assets as of June 2019. The fund has not yet been making payments to policy holders including an estimated 12,470 claimants for Sh4.39 billion.
Some of the firms which have gone under over the years are Blue Shield Insurance, United Insurance Company, Standard Assurance Company, Concord Insurance Company, Access Insurance Company, Stallion Insurance Company Ltd and Lakestar Insurance Company.
Initially the law only allowed claims to be paid after an underwriter becomes insolvent, defeating the objective of cushioning policyholders from losses accruing from distressed firms. Treasury changed the law allowing firms that went under since 2005 when the fund was set up to be paid.
The IRA says the law change does not apply retrogressively and although Blue Shield and United Assurance qualify for compensation, the failed firms still have to go through court process and be liquidated.