Customers face Sh5bn exposure in Directline as SK Macharia ignores IRA

SK Macharia

Media mogul SK Macharia in this picture taken in 2021.

Photo credit: File | Nation Media Group

Customers of troubled Directline Assurance Company face exposure of at least Sh4.86 billion after the firm's key owner Samuel Kamau (SK) Macharia said that it will not honour any claims amid an escalating row with the industry regulator over the shareholding register.

SK Macharia, a businessman with interests in diverse sectors including media, now says that Directline, where he holds a key stake through Royal Credit Limited, claims that any insurance cover issued by the company is “invalid” due to “illegal” alteration of the share registry.

Royal Credit Limited continues to run cautionary media adverts, ignoring the Insurance Regulatory Authority’s (IRA) position that the insurer is validly registered and must continue to settle claims arising from the over Sh4.86 billion in premiums received from customers and continue to sell new cover to willing clients.


“Any insurance covers issued by Directline are invalid. This is due to illegal alteration of the company’s CR12 imposing on Directline illegal shareholders and directors who are now running the company,” claims Royal Credit through media adverts.

“Royal Credit Limited cannot guarantee payment of any payment of any claims by Directline as Sections 23, 71, and 166 of the Insurance Act have been contravened. Under the prevailing circumstance, Royal Credit cautions against any purchase of insurance policy from Directline.”  

CR12 is an official and legal confirmation or Certificate by the Registrar of Companies in Kenya indicating the details and the directors and shareholders of a company.

The standoff has exposed thousands of customers, especially matatu operators and millions of public service vehicle (PSV) users given Directline is the market leader in PSV covers. About 70 percent or Sh3.4 billion of the Sh4.86 billion Directline premiums as at the start of 2024 were for motor commercial PSV covers.

Mr Macharia’s stand on the validity of the Directline covers is despite a warning from the IRA. The regulator’s chief executive Godfrey Kiptum said on December 23, termed Mr Macharia’s position as illegal, insisting that the insurer must continue operating and honouring claims.

“All insurance policies issued by Directline Assurance Company Limited remain in full force and effect. Policyholders are assured that their contracts remain valid and the insurer is fully liable for any claims arising therefrom. Any purported status to the contrary is void of legal effect,” said Mr Kiptum in a statement.

Mr Kiptum added that CR12 is issued by the Registrar of Companies and that IRA has no legal mandate to alter such forms or make any changes whatsoever.

“Any person requiring any rectification of such records should make the necessary application to relevant statutory offices in accordance with the governing laws. Additionally, there is no connection between changes in shareholding of an insurance company and validity of insurance policies duly issued by the insurer to policyholders,” said Mr Kiptum.

This is the latest twist in the row between Directline and IRA over the shareholding of the insurer.  Earlier this year, Mr Macharia had secretly withdrawn Sh400 million from the insurer, wired it to his real estate firm, and announced that the firm had shut down.

Mr Macharia announced last week that the board of Directline had dissolved, all employees dismissed and all assets taken over by Royal Credit—a company he chairs.

The secret transaction revived the five-year-old fight over the company’s shareholding structure.  The IRA revoked the shutdown move and successfully sued Mr Macharia, who was ordered to return the money.

Directline is the market leader in motor commercial PSV insurance, which takes care of injuries and deaths from public transport vehicles, popularly known as matatus. The insurer also offers private vehicles and other commercial vehicles.

The insurer opened 2024 with Sh3.4 billion gross premiums from motor commercial PSV covers, giving it a 61.56 percent market share in this class of business, according to IRA data.

It was followed at a distance by Africa Merchant Assurance (14.95 percent), Invesco (8.15 percent), Pioneer (6.71 percent), and GA Insurance (six percent).

Directline shareholding may have risen further after Invesco sunk into statutory management this year, barring it from continuing to underwrite any class of insurance. The exit of Invesco left the market with only nine insurers as underwriters of commercial buses and matatus.

The shareholding row in Directline has been in the courts over the years. Terry Wanjiku Wijenje, who maintains that she holds a 20 percent share in Janus Limited, previously told the court the ownership row at the company arose following the death of John Gichia, Mr Macharia's son.

She said Mr Macharia, his wife, and Royal Credit Limited hold 9.664 percent shares while AKM Investments Limited, Janus Limited, Sure Invest Company Limited, Stenny Investment Pty Limited, and Triad Networks Limited collectively held 90.336 percent shares of the company. Mr Macharia has always opposed this structure, arguing that his Royal Credit is the majority shareholder.​

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