Resolution Insurance Limited has been facing a number of challenges, particularly relating to its ability to meet its obligations and mitigate its inherent risks.
Despite the various intervention measures taken as provided for by the Insurance Act, the insurer has continued to slide into operational and financial difficulties.
On Tuesday, the insurer, which started as a medical underwriter in 2002 before diversifying into other general cover including motor, home and personal accidents, has been placed under statutory management by the Insurance Regulatory Authority (IRA).
“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,” read IRA statement.
When a company is placed under statutory management it means that the regulator takes over its core functions, managerial and operational.
The management of the company is locked out of running the company for the period under which it is under statutory management.
The story of Resolution Insurance depicts a company that reached dramatic heights only to face a dizzying fall, affecting thousands of people in the process.
At its peak, industry experts predicted a bounty decade for the insurer when in 2014, it raised new capital as part of its four-year strategy to move it to the top tier of the industry to compete with the likes of AAR Insurance and UAP Old Mutual Group.
At the helm was Peter Nduati – who founded Resolution Insurance in 2002 as medical insurance provider – a man who in November 2014 guided the firm in securing a Sh1.67 billion ($18.7million) deal for a majority stake by LeapFrog Investments, through its holding company, Resolution Health East Africa Ltd.
LeapFrog Investments would then inject Sh1.1 billion new capital with the intention to support diversification strategy as a fully fledged general insurance business.
The financing was part of a Sh2.5 billion investment the firm was seeking for its expansion bid.
It was a decision the deal’s crafters believed would propel the company as a key player in the East African Community (EAC) region, a market that was estimated to be worth over Sh180 billion ($2 billion) at the time the transaction was met.
“There is a major opportunity to extend access to health and diversified insurance to millions of low-income emerging consumers across East Africa, leveraging Kenya’s strategic position as a regional leader and gateway in,” reads a 2014 statement by Leapfrog.
Indeed, those steps paid off as the insurer announced a 21 percent increase in its total income for the full year 2015, recording an increased gross written premiums from Sh2.5 billion in 2014 to Sh2.9 billion in 2015, attributing the growth to increases on SME and retail portfolios.
However, the two lasted for seven years then parted ways in 2021, paving way for the UK-based Insurance firm, Linkham Group, which fully acquired 100 per cent interest held in Resolution Insurance by LeapFrog Investments for an undisclosed amount.
It was a deal the Competition Authority approved and given the green light by industry regulator, Insurance Regulatory Authority (IRA).
The deal had experienced significant delays owing to macroeconomic challenges from the Coronavirus pandemic thereby exposing the company to heavy working capital restraints.
The firm had hoped to finalize on capital raising and take immediate measures to normalise operations, but the acquisition process of a majority stake in the firm hit the company’s capital, as a number of hospitals shunned its health covers.
In March 2018, the High Court dismissed Resolution’s application to challenge Sh1.5 million awarded to a HIV positive woman, after High Court judge Roslyn Aburili dismissed the case filed to fight the award given by the HIV and Aids Tribunal (HAT).
Resolution also had a spat with the Embassy of Chile in Nairobi which recently wrote to the firm seeking a refund of services not rendered.
The collapse marks another low moment for a sector that is grappling with delayed claims payments.
Customers seeking to renew or underwrite new covers such as motor vehicle, homes, travel, personal accident, professional indemnity and school insurance will now not have Resolution on their list of choices.
Also affected are policies for business, employee benefits, marine, bonds, engineering and hotel and restaurant insurance, which the insurer has been offering.