A proposed bill promises the Policyholders Compensation Fund (PCF) major tax exemptions and privileges as it aims to enhance its operations in the insurance sector.

The PCF Bill 2025 aims to improve the confidence of insurance policyholders and claimants while also streamlining its operation and regulatory functions.

The Fund was established for the primary purpose of providing compensation to claimants of an insurer that has been put under Statutory Management and for the secondary purpose of increasing the general public’s confidence in the insurance sector.

For insurers, this means that they may find greater support from a strengthened PCF which is currently seeking a firm base to perform well on its mandate.

In a most recent scenario, PCF stepped in to compensate Xplico policyholders when the company fell under receivership thereby enabling them access to the compensation funds that would otherwise be cumbersome if such provisions were not available.

In a statement issued last December, the Insurance Regulatory Authority (IRA) placed the company under the statutory management of PCF prohibiting the insurer from issuing insurance contracts.

If the bill goes through, policyholders will reap big as this aims to protect them while streamlining the fund’s operational and regulatory functions.

“The Cabinet Secretary may, by order published in the Gazette, specify any tax, duty, fee, rate, levy, or other impost as one to which Policyholders Compensation Fund shall not be liable, and the law relating thereto shall have effect accordingly,” the bill reads in part.

According to the bill, PCF is expected to be fully exempted from taxation by any law in respect of income or profits, allowing access to the full amount by policyholders. Additionally, no duty shall be chargeable under the Stamp Duty Act in respect of any instrument executed by or on behalf of the fund or where it is acting as statutory manager or liquidator. This will ensure that the fund commits to its core mandate without pressures on claims by external factors.

Also, the bill has highlighted that PCF on its own or acting as statutory manager or liquidator of an insurer shall be exempt from contribution, attachment, garnishment, lien, foreclosure or sale. In 2023, the government had proposed a 16 per cent Value Added Tax on compensation funds to policyholders in a bid to raise more revenue to fund the financial year’s budget.

However, the proposal was opposed by stakeholders in the industry who said that it would have a huge knock-on effect on the insurance business.

During the time, a consortium of insurance companies represented  by Price Waterhouse Coopers (PwC) stated that “ in our view, this proposed change is bound to have a significant  impact on the  general insurance sector.”