Top insurance managers targeted in new legislation

A new Bill that has been drafted to ensure top managers are held to account following a spate of failures in the insurance sector is expected to change fortunes in the sector.

If passed, the Insurance (Amendment) Bill, 2023 introduced into the National Assembly by Leader of the Majority Party Kimani Ichung’wa, would impose direct responsibility on managers of insurance companies for the losses stemming from the collapse of their firms.

“The Bill seeks to ensure accountability within insurance companies and observance of fiduciary duties as well as professional responsibilities by senior managers of insurance companies to provide for offences and penalties relating to the management of insurance,” says the draft law in part.

Experts say that the legislation heralds a potential transformation in the accountability framework within the insurance sector. By holding managers responsible for losses arising from their companies’ failures, the legislation aims to instill a greater sense of stewardship and prudent risk management.

This potential shift in liability comes in the wake of a series of high-profile failures within the sector, prompting a closer examination of the need for robust safeguards. The outcomes of this legislative endeavour could have far-reaching implications for the future of insurance operations and stability.

The collapse of several insurance companies in the last 10 years has led to low confidence levels from potential clients in Kenya and most people have been left licking wounds, even as the policyholder compensation fund which is supposed to pay the claimant when the company collapses has not functioned as intended.

Notable casualties in this string of collapses include industry stalwarts such as Amaco, Blueshield, Kenya National Assurance Company, Access Assurance Company, Stallion and Lakestar.

These failures have not only resulted in considerable financial losses for policyholders and stakeholders but have also shaken public trust in the insurance sector’s overall stability.

The Bill seeks to rectify these vulnerabilities by making insurance company managers more accountable for the health and longevity of their organizations.

Its central objective is to establish a framework that ensures insurance companies are held accountable for their operations, even in the event of failure.

If the Bill successfully navigates the legislative process, managers will face a heightened sense of responsibility, compelling them to diligently oversee their companies’ financial health and risk management practices.

This heightened accountability would encourage a more prudent approach to risk management, financial planning, and strategic decision-making.

In turn, this would contribute to safeguarding the interests of policyholders, investors, and the industry as a whole.

Industry experts and stakeholders argue that it would provide a strong incentive for managers to exercise due diligence and adopt sound risk mitigation practices, ultimately reducing the likelihood of catastrophic failures.