Policyholders in collapsed insurance firms win as Treasury removes stringent rule

Policyholders facing uncertainty in the aftermath of insurance company collapses have received a welcome relief as the Treasury formally abolishes a challenging requirement that demanded insolvency proceedings be completed before compensation could commence.

This significant policy shift, unveiled by Treasury Cabinet Secretary Njuguna Ndung’u, promises swifter relief for affected individuals.

The new regulations, as published by Secretary Ndung’u, dictate that compensation payouts will immediately initiate once an insurer finds itself under statutory management, coupled with the cancellation of its license by the Insurance Regulatory Authority (IRA).

This marks a substantial departure from the previous stipulation, which mandated collapsed insurers to navigate through arduous insolvency procedures before claimants could receive compensation. In most cases, these protracted procedures extended up to a staggering 10 years, imposing severe hardships on policyholders.

Under the recently enacted rules, the only prerequisite for compensation initiation is an official notification from the IRA confirming the collapse of an insurer.

This streamlined process is set to alleviate the financial burdens endured by countless claimants who were previously subjected to prolonged waiting periods.

In recent times, the insurance industry has witnessed the struggles of several prominent firms, including Resolution Health, Concord Insurance Company Limited, and Standard Assurance Kenya Limited.

These companies have faced the imminent risk of liquidation if their attempts to reverse their financial fortunes fail to materialize.

This decisive change in policy comes as a welcomed relief to policyholders who have endured prolonged periods of uncertainty when insurers faced financial turmoil.