Resolution insurance customers woke up to a rude shock after they got emails indication that their covers had been cancelled. This follows the collapse of the insurance company after it was unable to pay its creditors which led to it being placed under the care of the Policyholders Compensation Fund.
The insurance company has collapsed with over Ksh. 6.5 billion in client cash, insurance claims, and creditor funds after its shareholders failed to recapitalize the business. It had also collected Ksh. 4.1 billion in premiums from policyholders out of which 90 percent were medical customers.
The firm is also reported to owe creditors and had claims from the insurance business totaling Ksh. 2.5 billion.
The Policyholders Compensation Fund (PCF), which has taken over the firm as the statutory manager, indicated that the company presented liabilities to the regulator, but it will conduct an independent audit to verify the actual size of the claims. PCF is also expected to announce compensation to policyholders which will be capped at Ksh. 250,000 per client.
Resolution becomes the first underwriter to fold up after relative stability in the sector since the collapse of Concord Insurance in 2013.
The sector witnessed a spate of collapses, including United Insurance in 2005, Standard Assurance in 2009 and Blueshield in 2011. This is what prompted the formation of the PCF 17 years ago to cushion holders of insurance policies where companies are unable to meet their obligations.