Directline Assurance has announced its closure and the ceasing of its operations, through a statement aired by Citizen TV on Monday night.
Royal Credit Limited Chairperson and media mogul, SK Macharia, declared that the insurance company was terminating the contracts of all its employees. He also declared the dissolution of the insurance company’s Board of Directors.
“The Board of Directors of Directline has been dissolved and all the assets taken over by Royal Credit Ltd. All employees have been dismissed, and Directline will no longer issue insurance services,” said his statement in part.
The shutdown is allegedly connected to an unauthorized Kshs USD 3 Million (KES 400 Million) transfer to Toy and Suna Holdings LTD, a company he controls. This is according to court filings by the Insurance Regulatory Authority (IRA). The millions are “purportedly to finance the development of stalls and low-cost housing at the Toy Market” said the regulator’s documents.
The court filings say the USD 3 million was wired from Directline’s Diamond Trust Bank account on May 16. IRA holds the unauthorized transaction is fraudulent and defrauds policyholders and beneficiaries of the company.
This moved the regulator to swiftly flag down the transaction and move to court. In the process, IRA froze all Directline Assurance Company accounts leading to the closure announcement by Macharia.
In a counter move, the Kenya Insurance Regulatory Authority (IRA) suspended the closure of Directline Assurance, a few hours after Macharia’s announcement. The unexpected closure would have seen policyholders lose USD 15.4 million (Kshs 2 billion) in unpaid claims.
Directline Assurance Woes
This latest standoff adds to the list of feuds between Macharia, the regulator, and the directors of the company.
The company has been facing difficulties following the embezzlement of Kshs 7 billion (53.7M USD) by the former directors. Macharia argues that the authorities had failed to resolve the case adequately and is still dragging in court for years.
IRA maintains that the insurer was still operational and licensed and that only it has the legal power to approve, suspend, or cancel the operations of any insurance company doing business in the country.
This renders Macharia’s decision null and void. The embattled insurance company is now under scrutiny by the IRA, which will take action in compliance with the Constitution.
The motor vehicle insurance, which controls 70% of the local PSV insurance business, started operations in November 2005 and provides cover for Public Service Vehicles (PSV).
The shareholder register, according to IRA, shows Macharia, through Royal Media Services (RMS), owns a 10% stake in the underwriter (Directline), while four other investment vehicles hold a 20% stake each. His son, who died in 2018, is also a shareholder, through his company AKM Investments.
