Insurer gets liquidator as rescue bid collapses

Efforts spanning nearly two years to revive the financially struggling Resolution Insurance company have proven futile, culminating in the firm’s imminent liquidation.

The High Court, as of January 11, appointed Long’et Terer as the interim liquidator tasked with overseeing the closure of the insurance firm.

Responsibilities of Terer include conducting a comprehensive assessment of all debts owed by the insurance company.

This assessment will serve as a crucial guide for settlements, taking into account the assets sold and the amount of debt that can be recovered.

The liquidator was gazetted last Friday to start the process of taking stock of all the people the insurer owes with the purpose of settling their dues, depending on what will be raised from the sale of the insurer’s assets or collection of any debts owed to it.

“The creditors are required to send full particulars of their claims against the company to the interim liquidator, or in default thereof, they may be excluded from the benefit of any distribution made before such debts are proved,” said Mr Terer in a gazette notice.

In April 2022, the Insurance Regulatory Authority (IRA) mandated the Policyholders Compensation Fund (PCF) to step in as the statutory manager of Resolution Insurance due to various issues, including the company’s inability to settle claims.

“Despite the various intervention measures taken as provided for by the Insurance Act, Resolution Insurance Company Limited has continued to slide into operational and financial difficulties,” stated the IRA at that time.

“The insurer is also not able to comply with statutory requirements relating to capital adequacy, submission of returns, and governance structures.”

“In particular, the company is not able to settle claims to the detriment of claimants, policyholders, and other creditors. The insurer is also not able to comply with statutory requirements relating to capital adequacy, submission of returns, and governance structures,” IRA stated.

By last year, the regulator had raised a red flag after looking at the insurer’s book of accounts that revealed a Sh3.6 billion hole that made it impractical to revive the firm which was among local firms that were looking very promising in the last decade.

A public notice was issued by PCF on April 5, 2022 upon assuming the management role, confirming IRA’s directives and declaring that its statutory management would last for 12 months in accordance with the Insurance Act.

The Compensation Fund proceeded to cancel all existing policies issued by Resolution Insurance Company and stopped all payments to the policyholders and creditors for a period of 12 months effective 6th April 2022.

The Fund further directed policy holders and claimants with unsettled claims owed by Resolution to file their claims formally with it. It explained that the process of verification and approval for payment would be done in line with the Fund’s guidelines and procedures which will take about 30 days.

“PCF will compensate claimants of Resolution Insurance Co. Ltd (Under Statutory Management). The maximum compensation payable on any one claim lodged by a claimant is Sh250,000,” the Fund said in the public notice.

By September last year last PCF announced that it had disbursed Sh82.2 million in compensation owed to 724 claimants of Resolution Insurance company.

This settlement, however, is meagre compared to the over Sh6 billion debt owed to clients and creditors by the insurer where PCF claims that it requires about Sh4 billion to revive the firm.

Shareholders of collapsed Resolution Insurance were two years ago locked in a court fight over $6 million that the founder of the firm claimed his partners failed to pay after acquiring shares in the insurer.
Resolution founder Peter Nduati accused the majority shareholder, Linkham Services Ltd, and its associates of breaching a share purchase deal blamed for the collapse of the insurer.