The company, which has over Sh1 billion in liabilities, is now banned from underwriting any new policies.
IRA Chief Executive Officer Sammy Makove said despite various initiatives of restructuring at the organisation – including attempts to raise additional capital by the shareholders – the company continued to face serious challenges.
IRA said Blue Shield had also been unable to meet its obligations as an insurer including the payment of claims to claimants and policyholders as well as other creditors.
Makove said the decision was reached after the regulator considered all factors “including further exposure to the insuring public and seeing no possible cure to the problems facing the underwriter.”
IRA has appointed Eliud Muchoki Mureithi as statutory manager.
Blue Shield has been in the regulator’s cross hairs in recent years, prompting IRA to appoint three directors to help in the turnaround of the firm, which has been facing cash flow problems and allegations of fraud.
According to IRA reports, Blue Shield’s solvency margin had a deficit of Sh464 million compared to its allowable margin of Sh321 million.
Legal woes have not been far off including the 2008 attempt by a Nairobi lawyer to attach its assets for auction to cover millions of shillings owed to him in legal fees.
“The insurer is not authorised to transact new business henceforth. All enquiries may be referred to the statutory manager,” Makove said.
Blue Shield had tried to reverse its bad streak by investing in the lucrative real estate sector, but this failed to bear any fruit as the company continued to be troubled by legal tussles with policyholders, owing to unpaid claims demanded by over 20,000 claimants.
Makove was particularly worried that the growing trend of PSV underwriters going under is worrying and as such needs immediate action.
It is estimated that 50 percent of the claims reported to PSV underwriters are fraudulent.
Poor corporate governance has also contributed to a large extent in perpetrating the problems facing PSV underwriting leading to unhealthy competition and mismanagement of funds.
“The Authority in consultation with Government continues to explore ways in which this risk may be better managed with a view to protecting the stakeholders in the industry and the public,” he said.