NAIROBI, Kenya, Mar 11 – Standard Assurance has been placed under statutory management for a period of 12 months.
Insurance Regulatory Authority (IRA) said on Wednesday that it has appointed HLB Ashvir Consulting as the (statutory) manager who should make their recommendations by March 2010, to determine whether to wind up the insurance firm or revive it.
“This however means that the insurer is not authorised to transact any new insurance business with effect from today (Wednesday). The appointed manager shall communicate to the policyholders and creditors on further action in due course,” IRA Chief Executive Officer Sammy Makove told reporters.
The company, which is primarily a Public Service Vehicles (PSVs) underwriter, has been in the news lately for failing to honour its obligations policyholders and the public.
Auctioneers have been raiding the insurance company’s premises for the last few weeks in a bid to recover some of their clients’ assets.
Mr Makove told reporters that the Authority has been addressing various issues affecting the company since last year, when it noticed distress signals.
“We initiated discussions with its board members and shareholders with a view to finding a solution to the financial situation,” Mr Makove said, while defending the regulator against claims of laxity.
He revealed that some of the suggestions made during those meetings included the disposal of land and buildings belonging to the company in order to inject the necessary liquidity and forestall a run on the company.
The shareholders also offered personal property for sale to raise the requisite fresh capital amounting to more than Sh100 million, which was needed to address their indebtedness.
However, the current financial crunch has dealt the company a big blow as most of the properties which were earmarked for sale are still unsold despite the good offers on them.
“The shareholders have also failed to raise the funds (Sh100 million) and as a result the company has failed to honour its obligations, which include judgements by third party claimants,” the CEO said.
On Tuesday, insurance industry players complained that hefty losses, averaging 90 percent were being reported in the motor insurance industry, due to escalating fraud cases.
“The PSV underwriting sector is seen as a cash cow by fraudsters who span the whole territory. These so called ambulance chasers have established a very elaborate system that defrauds insurers of millions of shillings daily,” Mr Makove complained.
If Standard Assurance is closed down, it will be the fourth insurance company after United Insurance, Invesco and Lakestar that have collapsed due to fraud, mismanagement and lack of proper corporate governance.
Insurance players say the culture of recklessness in the operations of the PSVs and non-compliance with the ‘Michuki rules’ make the risks extremely difficult to underwrite and expose the funds of those insurers, who take the risk.
Mr Makove announced that a taskforce formed to look into the PSV underwriting issue and make appropriate suggestions for the government to take, would hand over its report on Friday.
With this news, the public’s poor perception of the insurance industry is unlikely to change despite assurances from the regulator that it is working to protect policyholders, and ensure that claims are paid on time.
If this trend continues, the IRA’s and government’s objectives of increasing insurance penetration levels in the country will remain just but a pipe dream.