Policyholders caught up in the collapse of insurance companies will now receive a maximum payout of KSh 500,000 per claim, after regulators doubled the compensation ceiling under the Policyholders Compensation Fund (PCF).
- •The cap, raised from KSh250,000 to KSh500,000, was approved by the PCF Board of Trustees in consultation with the Cabinet Secretary for the National Treasury and applies to insurers placed under statutory management or whose licences are cancelled under the Insurance Act.
- •The move comes amid a string of insurer collapses and financial distress that have shaken confidence in Kenya’s insurance sector.
- •Thousands of policyholders are still seeking compensation following the failure of firms such as Standard Assurance (Splice), Resolution Insurance and Invesco Assurance, while Directline Assurance has in recent months faced regulatory intervention over solvency concerns.
Under the new framework, compensation payable by the statutory fund will not exceed KSh500,000 per claim, regardless of the size or class of policy held, potentially leaving holders of high-value life, medical and commercial covers exposed to significant losses.
According to the draft Kenya National Financial Inclusion Strategy (2025–2028), rising cases of fraud schemes, cyberattacks and unethical lending practices have eroded consumer trust across the financial sector, prompting regulators to strengthen safety nets for savers and investors.
In the insurance industry, the PCF acts as the last-resort protection mechanism, reimbursing policyholders and third-party claimants when insurers are placed under statutory management or lose their licences. The fund operates on a pre-funded model financed by insurers and policyholders, and is considered structurally sound, though reforms are under way to expand its role in liquidation and claims handling.
Authorities are also weighing a review of the compensation limit for bank depositors and exploring safeguards for trust-based products such as pensions and digital financial products, which currently fall outside existing protection frameworks.
In the capital markets, regulators have already raised the compensation ceiling under the Investor Compensation Fund fourfold to KSh 200,000 from KSh 50,000, strengthening protection for retail investors when stockbrokers or investment firms fail, though the cap still falls short for larger portfolios.
While the cap has been doubled, policyholders with significant insurance exposure remain largely unprotected.
