An Act of Parliament to amend the Insurance Act.
|PROPOSED PROVISION FOR AMENDMENT||PROPOSED AMENDMENT||OUR COMMENTS|
Amendment of section 40 of Cap. 487
|Section 40 of the Insurance Act is amended by deleting the proviso to subsection (1).|
The proviso provides as follows:
Provided that the total deposits including the additional deposit shall not exceed three million shillings in the case of general insurance business and three million shillings in the case of long-term insurance business.
|The deposits held by the Central Bank of Kenya on behalf of insurers are a form of security as they can be utilized to ensure claims that are made with respect to an insurance policy are honoured or settled.
The capping of the total deposits including the additional deposit to Kshs. 3 million had the effect of limiting the amount of deposits held by CBK on behalf of an insurer.
This proposal seeks to remove the cap on the total deposits which in effect will translate to an increase in the amount of deposits that can be held by CBK on behalf of an insurer. Since one of the objectives of the Bill is to enhance accountability within insurance companies and observance of fiduciary duties, the ability to honour claims made is at the core of this duty.
The Amendment to section 40(1) of the Act will therefore be a step towards ensuring insurance claims are more likely to be honoured.
Insertion of a new section 67H of Cap. 487
Any shareholder, director, principal officer, or management staff of an insurer who:
a. fails to take all reasonable steps to secure the compliance of a registered or licensed person under this Act;
b. fails to take all reasonable steps to secure the accuracy and correctness of any statement or report submitted under this Act or any other applicable written law;
c. fails to supply any information required or effect any directive issued under this Act;
d. fails, without lawful justification, to settle a judgment or any claim under this Act;
e. without claim of right takes or converts any property of the insurer to his or her personal or associate’s use or gain, including:
i. permanently depriving the insurer of the property;
ii. using the property as a pledge or security;
iii. receiving the insurer’s property and failing to remit or reasonably account to the insurer;
iv. dealing with the property of an insurer in such a manner that it cannot be returned in the condition in which it was at the time of the taking or conversion,
commits an offence under this Act.
A person who commits an offence under this section shall be liable on conviction:
a. on a first offence;
i. in the case of an individual, to a fine not exceeding five million shillings or to imprisonment for a term not exceeding two years; or
ii. in the case of a company, to a fine not exceeding ten million shillings; and in the
b. on any subsequent offence:
i. in the case of an individual, to a fine not exceeding ten million shillings or to imprisonment for a term not exceeding five years; or
ii. in the case of a company, to a fine not exceeding thirty million shillings.
The court may make an order for the payment by the person convicted of an offence under this section of compensation to a person who suffered loss by reason of the offence.
An order under sub-section (3) may be in addition to or in substitution of any other penalty or remedy available to that person.
The amount of compensation under sub-section (3) shall be:
a. the loss sustained or adverse suffered by the person claiming compensation; or
b. the profits that have accrued to the person liable to pay the compensation.
We propose the deletion of the word “shareholder” appearing immediately before the word “director”.
This is because the clause as drafted seeks to hold shareholders liable for the acts attributable to directors and management staff of an insurance company.
While shareholders have a financial interest in a company and may have certain rights (for example, voting rights, receiving dividends etc.), they typically are not involved in the day-to-day operations or management of the company and therefore cannot be held liable for acts done in this regard.
This proposal seeks to enhance accountability within the insurance sector and the observance of fiduciary duties as well as professional responsibilities by directors and senior management staff. The proposed amendment provides for the offences relating to the management of insurance companies and the penalties thereto.
The People Daily Newspaper dated 9th August 2023 provided a list of insurance companies that have collapsed over the years. They include:
c. Kenya National Assurance Company;
d. Access Assurance Company;
e. Stallion; and
This is a good proposal that seeks to repair the reputation of the insurance sector as the collapse of insurance companies has led to reduced public trust and low confidence levels from potential clients.
Amendment of section 70 of Cap. 487
|Section 70 of the Insurance Act is amended by deleting the word “advisory” appearing in sub-section (2).||This proposal seeks to update the principal Act by deleting the word “Advisory” appearing before the word “Board” in sub-section (2).
The term “Advisory Board” was deleted by section 2 (a) of the Insurance (Amendment) Act No. 11 of 2006.
Amendment of section 150 of Cap. 487
|Section 150 of the Insurance Act is amended in the marginal note by deleting the word “surveyors” and substituting therefor the words “insurance surveyor”.||This proposal seeks to ensure uniformity throughout the principal Act as the term “insurance surveyor” is used consistently throughout the Act and not the term “surveyor”.
Section 2(1) of the principal Act defines the term “insurance surveyors”.