Consumer lobby claims insurance companies in breach of law

The Consumer Federation of Kenya has filed a petition against the insurance regulator and a host of companies including Madisson Insurance, Xplico, Invesco, Monarch among others for collecting premiums without the capacity to settle claims.

Cofek Secretary General Stephen Mutoro has gone to court alleging the regulator has allowed several companies to flout capital adequacy rules putting customer premiums at risk.

The country has failed to strictly implement the capital adequacy ratios on insurance companies that would have led to consolidation of weak players.

The previous regime under CS Ukur Yatai said the government slackened compliance on the back of Covid-19 challenges which has left the industry exposed.

According to the Insurance regulator report for the first quarter 2023, Trident and Xplico did not report on their financials in the first quarter of this year despite continuing to operate.

The Insurer report showed that Corporate, Madison, Monarch and Trident led insurers with the most complains from policyholders  as  the Authority registered 522 complaints in Q1 2023

Long term insurer like Madison has been struggling with capital tied down in real estate with published financials showing liabilities exceeding assets, impacted by cumulative losses of over the years.

Madison has operated below the required capital adequacy ratio for years which saw the Insurance Regulatory Authority bar the company from listing new annuity business to protect the public an indication of the dire situation at the firm.

The company owners have approached the regulator and given a plan to restructure the business to ensure compliance.

The plans include selling unquoted investments and properties valued at Sh8 billion and quit the annuity business to convert the money in high yielding bonds and deposits in a move to restructure its balance sheet and boost capital.

Kenya’s very shaky insurance sector saw the collapse of Resolution Insurance last year exposing clients to the risk of major losses, with the maximum guaranteed compensation standing at just Sh250,000.

The collapse of Resolution insurance illustrated just how lax insurance regulations were being implemented allowing companies to operate for years despite their sorry state of affairs.

Resolution Insurance shareholders played games with the regulator for one and a half years while operating on negative working capital by promising to inject money that never came.

Following years of losses, Resolution Health had been headed to the grave unless its owners could not recapitalize the business to the tune of Kes4.3 billion.

The regulator, Insurance Regulatory Authority (IRA) agreed to an initial Sh1 billion injection by the new owners.

Leapfrog and the company founder Peter Nduati reached a deal with Linkham to come on as the new shareholders and recapitalize the business gradually.

However in April last year the regulator put Resolution Insurance under statutory management on failed rescue efforts sparking a blame game between the shareholders.