CS John Munyes summoned over KPC insurance scandal

CS John Munyes summoned over KPC insurance scandal

The Senate Energy Committee has summoned Petroleum Cabinet Secretary John Munyes over irregular contract for an insurance cover worth over Ksh.300 million at the Kenya Pipeline Company (KPC).

The committee is probing how an insurance company was awarded a job it never applied for, with the probe extending into forgery and alleged intention to sanitize a process of selecting the contested insurance firm.

CS Munyes is set to appear before the Senate Committee on Wednesday to answer on the controversial procurement of insurance covers and challenges facing insurance of all risk industrial and terrorism and sabotage cover components of KPC projects.

In a controversy that implicates AMACO Insurance Company who never applied for the job but were still illegally awarded the job to cover the two components.

Documents seen by Citizen TV indicate the evaluation committee for provision of insurance brokerage services had four members including former company secretary Gloria Khafafa who chaired the committee and three other members.

The committee shortlisted the firms to provide various insurances services at KPC. In its recommendation in a memo dated August 22, 2016, the committee tasked the then Managing Director Joe Sang to consider and award as per the recommendations of the evaluation committee.

On the controversial components in question, that is all risk industrial and terrorism and sabotage covers, Sedgwick Insurance Brokers and CIC Insurance won the respective bids.

Subsequently, the KPC MD Sang went ahead to inform Sedgwick in a letter dated August 31,2016 that they had been awarded among other covers, all industrial risk with CIC Insurance at a cost of over Ksh. 109 million annually.

The terrorism and sabotage cover was given to CIC at an annual premium cost of Ksh.11 million.

According to the Senate, this is where the musical chairs begin. Sedgwick wrote back to KPC introducing AMACO Insurance in the business on a 70% -30% revenue share.

The broker asking whether it was in order to co-insure the business awarded to them specifically industrial all risks and terrorism and sabotage covers this in contravention of the KPC policy on insurance that indicates insurance covers are placed through insurance brokers and a broker can only recommend one underwriter per policy.

Sedgwick in partnership with CIC Insurance on the two policies, the introduction of AMACO Insurance came in after the process had been sealed and completed, AMACO having tendered for insurance of motor vehicles, commercial motor vehicles and money and not industrial all risk and terrorism and sabotage covers.

The latest development throwing KPC in a spin necessitating variation of the tender, the evaluation committee was forced to sit and sanitize the process.

The tender was varied with the cost shooting up from Ksh.370 million to Ksh.402 million but a member of the evaluation committee, Zachary Otieno refused to append his signature on the variation report questioning the process.

Zachary questioned why AMACO had been induced as a broker contrary to the initial recommendation by the evaluation committee on industrial all risk and terrorism and sabotage covers.

In response, the then company secretary who chaired the evaluation committee Gloria Khafafa claimed AMACO was an underwriter and not a broker and thereby it was a typographical error which is still an illegality, given the company policy stipulates only one insurance cover per policy.

As such, two memo’s emerged all dated August 22 2016, indicating a shortlist of firms that had successfully bid for the jobs.

While one indicate Sedgwick alongside CIC won the tender for all industrial risk and terrorism and sabotage covers, another shortlist indicate Sedgwick/AMACO alongside CIC had won the bids with one document lacking certification stamp of being a copy of the original

An internal audit report has punched holes into the AMACO deal questioning the involvement of the insurance firm given that there were no instructions to co-insure in the tender documents.

A number of former top KPC managers are already in court over graft allegations at the company.