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Proposed fund to hold monies for insurance claimants
The Insurance Protection Fund shall mimic the Kenya Deposit Insurance Corporation (KDIC) by obligating licensed insurers to become members of the fund.
Funds held as compensation for claimants of insurers will be held in a new fund dubbed the Insurance Protection Fund.
The just published Policyholders Compensation Bill, 2025 has proposed establishment of the Insurance Protection Fund which shall consist of monies currently held in the Policyholders Compensation Fund (PCF).
The new fund will, however, be part of the PCF which was created for the purpose of providing compensation to claimants of an insurer that has been put under statutory management for the secondary purpose of increasing the general public’s confidence in the insurance sector.
This publication could not immediately establish the reasons for the segregation of funds currently held under PCF into a new kitty.
“The Insurance Protection Fund shall vest in the PCF and shall be administered by the board. The fund shall consist of monies which at commencement of this Act existed in the Policyholders Compensation Fund established under the Insurance Act,” reads part of the draft bill.
Other monies to be held in the fund include monies appropriated by Parliament, contributions of authorised insurance companies, grants and donations and borrowings.
The board of trustees of the PCF is expected to prepare annual estimates of the revenue and expenditure of the new fund in accordance with the set government rules and regulations.
The Insurance Protection Fund shall mimic the Kenya Deposit Insurance Corporation (KDIC) by obligating licensed insurers to become members of the fund.
Monies appropriated by the fund may be invested in Treasury bills and bonds or any other investments approved by the National Treasury.
Insurers and policyholders shall continue remitting the same premium to the new fund which is set at no lower than 0.25 percent of the premiums, with the amount paid by policyholders and insurers for a total contribution rate of 0.5 percent.
The compensation limit for general classes of insurance including aviation, motor, commercial, medical and personal accident covers remains set at Sh250,000 while that of life covers is set at the deficit of the life fund.
The PCF shall be the administrator of the fund including providing compensation to claimants, undertaking the resolution of a troubled insurer and facilitating orderly market exits through statutory management and liquidation.
The PCF shall also continue monitoring insurers for purposes of early intervention and prompt corrective action and advise the National Treasury on the policy to be followed in the compensation of claimants and the resolution of insurers.
PCF was established via a legal notice in 2004 and commenced operations in January 2005, informed by the collapse of several insurance companies in the prior years. The fund has until now been governed by rules and regulations contained in the Insurance Act.