Cofek to sue over health of insurance firms

In letters seen by Citizen Digital, Cofek says a number of insurance firms in the country have been breaching the capital adequacy ratio. This, it notes, is putting policyholders at risk in the event the organizations go under.

“It has come to our attention that majority of registered insurers are operating outside the threshold of provisions of the law thus badly exposing the unsuspecting consumers,’’ claims Cofek in its letter to Godfrey Kiptum, who is the Chief Operating Officer of IRA.

Specifically, Cofek argues that the firms which it lists in the letter have not been able to comply with Section 23 of the Insurance Act which prescribes minimum capital required to operate.

The consumer body further accuses IRA of negotiating compliance with firms to cover up for non-performance in what it says is described as an industry median.

According to the law, Cofek, in the letter signed by its Secretary General Stephen Mutoro, says the firms it has on its radar are issuing policy covers without an ‘operating license’.

“Please note that by the time of moving to court, if we must, the list may have more names as our investigations are still ongoing,” says Mutoro.

The industry regulator had in 2020 set new capital adequacy thresholds requiring companies to meet 200 per cent of the Prescribed Capital Ratio (PCR) by June 2020.

But the state, through the National Treasury, gave industry players more time to comply as a result of the Covid-19 pandemic.

The risk-based capital adequacy is meant to reduce cases where companies are unable to pay insurance claims.

Some of the firms Cofek lists have been operating below the capital ratio for years even before the new PCR came to be.

This, however, industry observers indicate has not attracted any sanctions from the regulator leading to the consumer body’s war cry.

In 2022, Resolution Insurance went under with over Ksh.6.5 billion in client cash, insurance claims, and creditor debts.

The firm was placed under statutory management by the regulator after attempts to inject fresh capital by shareholders failed.

It is such trends that the consumer body fears could grip the market if an intervention is not sought early enough and adequate operating capital sourced by industry players.