After 30 years, Makove calls it a day with mixed bag for insurance sector

When one mentions the insurance sector in Kenya, the one name that would immediately come to mind is Sammy Makove. He has been policing the sector for 30 years, half of which he was at the helm of the regulatory body.

The 58-year-old was involved in setting up the insurance department in the Ministry of Finance in 1987 with the help of international experts. He rose through the ranks to head the department as Commissioner of Insurance in 2001.

In 2006 when an independent Insurance Regulatory Authority (IRA) was formed, Mr Makove was recruited as its head.

Opinions about his performance are as varied as the persons one talks to. Those who praise him argue that his calm nature allowed the industry to stabilise, slowly regaining public confidence which had been battered by collapse of several insurers.

The soft-spoken Mr Makove has however been criticised for being too lenient in enforcing regulatory requirements as he sought to accommodate laggards in the fear that withdrawal of operating licences would erode public confidence.

“You have to think of the overall effect of your actions as a regulator— taking immediate action is sometimes not the preferred action,” said insurance industry analyst Isaac Ngaru who praised Mr Makove’s performance at the helm.

Several companies have sunk under Mr Makove’s watch, including Access Insurance, Stallion, Liberty, Lakestar, United, Standard Assurance, Invesco and most recently, Blue Shield and Concord.

Invesco has been revived with fresh injection of capital from Matatu Owners Association.

The holder of two masters degrees — B.A. in Psychology from Daystar University and an executive MBA from Jomo Kenyatta University of Agriculture and Technology — has also been credited with transforming the department into an autonomous regulator.

Mr Makove initiated the risk-based supervision which ensures shareholders of an insurer inject capital matching the volume of business they take.

In 2014 he introduced the electronic regulatory system in a move to curb cooking of books in the industry. Recent mergers and acquisitions in the sector are taken as testament to improved financial reporting in the sector.

Some of his shortcomings include his failure to achieve his proclaimed goal of consolidating the industry.

“From the five-year comparative analysis, the industry is growing at a decreasing rate, an indicator that the industry has reached saturation. This calls for a restriction on entry of new firms and a move towards mergers and acquisitions,” Mr Makove had said in his 2002 industry report.

There are 49 licensed insurers in the country up from 42 at the time while penetration has remained low with total premiums collected less than three per cent of the GDP.

He oversaw the separation of business conducted by insurers so that life business was independent of general covers.

The retiring regulator has left an industry that is progressing towards stronger capital buffers. In the past, insurers were required to hold capital as per the preferred business with general insurers required to have a minimum Sh300 million and life insurers Sh150 million.

The risk-based supervision has however changed these figures such that the minimum a life insurer will be required to have in capital is Sh400 million while a general insurer must raise their capital to Sh600 million by mid-2018.

A composite underwriter — who combines life and general business — will be required to have Sh1 billion minimum capital in two years.

However, in addition to the minimum amount, the actual capital that an underwriter must hold in two years will be based on the amount of risk they have, hence the term risk-based supervision by the IRA.

Mr Makove will also be credited with forming an insurance anti-fraud unit with trained police investigators. Fraud has been a major concern in the industry with reported incidence on the rise.

His decision to allow banks to distribute insurance services through bancassurance has been criticised by other agents who feel that market has been tilted to favour the lenders.

“We differed on the entry of banks in the industry and the way they have been bulldozing the industry —we hold that there were no enough negotiations and it was too early to let them in,” said the chairman of Bima Intermediaries Association of Kenya, Washington Ndegea.

Mr Makove was under investigation by the police this year after Blue Shield Insurance, which is under statutory management, accused him of failing to account for over Sh400 million rent collected from a building owned by the company.

Shareholders of the insurer were of the view that prolonging the statutory management period of Blue Shield Insurance Company Ltd from September 2011 to date had facilitated the alleged misappropriation of the rental income.

In his profile Mr Makove describes himself as a strong believer in God and one who hates complacency and loves to keep time.

His passion for insurance has seen him take several professional certificates including Chartered Insurance Practitioner, Associate of the Insurance Institute of Kenya and Associate of the Chartered Insurance Institute of the UK over and above his Bachelor of Commerce (Insurance Option) from the University of Nairobi.

Mr Makove’s second four-year term as chief executive of IRA ended last year when he received a one-year contract extension ending next January.