The High Court has ruled that the Policyholders Compensation Fund (PCF) must return Kshs. 36 million to the estate of Resolution Insurance, after determining that the withdrawals made from the collapsed insurer’s bank accounts were unlawful.
- •The High Court found that the Fund acted outside its authority by transferring Kshs. 122 million from the insurer’s accounts after a court-ordered interim liquidator had been appointed.
- •Judge Alfred Mabeya declared that the Fund’s actions were illegal and in contempt of the liquidation order.
- •Resolution Insurance collapsed in 2022 with KSh 6.5billion in client cash, insurance claims, and creditor funds.
Resolution Health was placed under liquidation in December 2023 owing to financial difficulties, eight months after the Commissioner of Insurance had placed it under statutory management. The Policyholders Compensation Fund (PCF), a state-owned statutory manager, compensates policyholders for unpaid claims when insurance companies collapse.
Despite receiving notice of the liquidation in January 2024, PCF paid out substantial sums to unsecured creditors, including law firms and third-party companies on two days that same month.
The liquidator sought the court’s intervention, arguing that under Kenya’s insolvency laws, any transfer of assets after a liquidation order is issued is void unless approved by the court. The judge agreed, stating that the Fund had no legal authority to manage the company’s money once liquidation proceedings had begun.
“In view of the foregoing, the Fund acted illegally. It sought to defeat the provisions of the Insolvency Act by attempting to favor some unsecured creditors over others. That is illegal and must be discouraged. A statutory body acting as such is being rogue,” Mabeya stated.
The Fund defended its actions claiming that it was entitled to settle legal expenses incurred before liquidation and that its role as a statutory manager allowed it to act in the insurer’s best interest. However, the court rejected this argument, emphasizing that once liquidation begins, financial decisions must be made under the liquidator’s authority, not by a prior manager.
Resolution Insurance had collected premiums worth KSh 4.1 billion by December 2020, according to the Insurance Regulatory Authority.
