Resolution Insurance Collapses with Sh6.6bn Client’s Money

Resolution Insurance has collapsed with over Sh6.6 billion in client cash, insurance claims, and creditor funds  after its shareholders failed to recapitalize the business.

According to the Insurance Regulatory Authority (IRA), the insurer had collected Sh4.2 billion in premiums from policyholders and 90 percent was from medical clients. The insurance firm also owes creditors and had claims from the insurance business adding up to Sh2.5 billion.

The Policyholders Compensation Fund (PCF) took over the firm as the statutory manager, and has said that the company presented the liabilities to the regulator. However, it will conduct an independent audit to verify the actual size of the claims.

Policyholders will be paid Sh250,000 each and PCF will be initiating the process of compensation within the next two weeks. Creditors and policyholders with higher value claims will wait for the liquidation of the business to see how much more they can recover.

Early this month, the insurance firm was stopped from transacting any new business by the Commissioner of Insurance, after falling into operational and financial difficulties and being unable to settle clients’ claims.

“The company has been facing a number of challenges particularly relating to its ability to meet its obligations and mitigate its inherent risks, inviting the commissioner to intervene on several occasions,” said Geoffrey Kiptam, Commissioner of Insurance.

The firm was founded by Peter Nduati and its collapse comes after the company raised money from several investors and expanded into medical and general insurance business.

Initially, it was a Medical Insurance Provider (MIP), operating both as an insurer and broker, taking premiums for the less risky outpatient services and reinsuring the risky in-patient business with local insurers.

Later on, legal changes ended the MIP business and the firm became a medical insurer then expanded to general insurance.

Resolution’s customers with the biggest exposure include those who had insured high-value assets such as moor vehicles, houses and commercial properties. Medical clients will also have a hard time as they will be forced to pay medical bills out of their pockets.

Resolution Insuring becomes the first underwriter to collapse after relative stability in the sector since the collapse of Concord Insurance in 2013.