Fraud claims haunt ex-insurance chief

For close to one and a half decade, Sammy Makove was the most memorable face in the Kenyan insurance sector.

He occupied the corner office at the Insurance Regulatory Authority (IRA) for 15 years since its establishment as an independent agency of the National Treasury in 2007. And as such, the name of the soft-spoken man became synonymous with insurance industry until he left IRA in November 2017.

With over 30 years’ experience in the sector, Mr Makove rose through the ranks from an underwriter to become Commissioner of Insurance and CEO of IRA. He is credited with building the structures enjoyed in the sector today. IRA was carved out as an independent body from the Treasury.

It was during his tenure that the sector grew through the increment of insurance products and services in the market. Sadly, though, it was during the same period that many insurance companies went under.

These include Access Insurance, Stallion, Lakestar, United, Standard Assurance, Blue Shield, Concord and Invesco.

Upon retirement, the former civil servant joined Kenbright Actuarial and Financial Services Ltd (KAFS) as an insurance management consultant.

All was well until he was recently charged with an attempt to irregularly sell a multi-storey building belonging to Blue Shield in Upper Hill, Nairobi.

The company was placed under receivership in September 2011 and Mr Makove, who was then the Commissioner of Insurance, appointed two statutory managers to manage it.

The statutory manager was tasked with tracing, preserving and securing all the assets and property of the company, recover all debts due to the company and deposit the monies with the Central Bank of Kenyay.

Although Mr Makove might have meant good for the company and policy holders, Blue Shield has come back to haunt him s.

For close to four years, Mr Makove was under investigation over accusations that he coulds not account for over Sh400 million rent collected from the firm by the regulator.

The company had good tenants among them Kenya Rural Roads Authority (KeRRA) and Kenya National Highway Authority (Kenha), and policy holders wondered how the Blue Shield could not honour their claims, forcing the company to face many cases in court.

And on Monday, Mr Makove was charged together with a former statutory manager John Sifa Keah, with intent to defraud the company.

The charges against them stated that they attempted to defraud the company by planning to dispose of its building known as Blue Shield Towers in Upper Hill, Nairobi.

The court heard that a moratorium was in place and the plan to sell the building had not been approved by the statutory management. They allegedly committed the offence between July 5, 2015 and July 31, 2016.

Mr Keah was separately charged with Mr Eliud Muchoki Muriithi, yet another former statutory manager, with stealing Sh10.2 million belonging to the underwriter, money which came into their possession by virtue of their employment.

The three denied the charges before senior principal magistrate Kennedy Cheruiyot who released them on cash bail of Sh100,000 each.

Trouble at the company started in March 2016 when the Directorate of Criminal Investigations (DCI)requested the Auditor-General to conduct a special audit of the company over allegations of misappropriations of rent collected by the statutory managers.

The DCI also wanted the audit to cover staff salaries and other expenses incurred for maintenance of the buildings belonging to the company.

The Auditor-General later made a raft of recommendations among them that IRA should develop guidelines to ensure that operations of insurance companies’ are guided by documented and approved standard appointment and operations procedures.

The Auditor-General also said IRA should put in place mechanism to ensure operations at insurance companies placed under receivership are guided by proper budgetary controls.

“Going forward, it is imperative that the placing of company under statutory management are guided by transparent criteria in the determination of ‘financial difficulties’ and a time-bound success deadlines against which the statutory management should be subjected to,” the report stated.

Prior to joining the IRA, Mr Makove had served at the Treasury as a Deputy Commissioner of Insurance from 1987 before becoming a full Commissioner of Fnsurance in 2002, a position he would later leave to assume his former role at the IRA.

The Law Society of Kenya (LSK) has challenged provisions of the law relating to the appointment of statutory managers and declarations of moratoriums, arguing that they should be declared void. The case is pending in court.

Once the IRA detects instability in an underwriting company, it appoints a statutory manager to verify its financial viability and seeks its findings and recommendations after a year.

If a statutory manager finds that an insurer can no longer profitably run a business, the IRA then recommends the High Court to appoint a liquidator who then sells off its assets and pays its policyholders.

The regulator is not mandated to offer guidelines or push the liquidator to dispose of the assets of the crippled insurer for faster compensation of policyholders afterwards.

The report by the Auditor- General faulted Mr Makove for appointing the statutory managers without documenting objective criteria to assure that he was the most qualified statutory manager.