S.K. Macharia Announces Directline Assurance Closure, Insurance Regulator Says Insurer Still Operational

In a statement on Monday, SK Macharia, Chairperson of Royal Credit Limited, announced that Directline Assurance would be closing and ceasing its operations.

Macharia stated that the insurance company was terminating all employee contracts and the dissolution of the 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," Macharia stated. 

He attributed the company's downfall to the misappropriation of over Sh7 billion by former Directline directors, a matter he claims the IRA did not adequately address.

As a result, all staff contracts were immediately terminated, and Royal Credit Limited will take over all assets owned by Directline Assurance.

The company has also suspended all insurance services.

The closure of Directline Assurance marks a significant shift in the insurance sector, impacting numerous policyholders and stakeholders.

Royal Credit's takeover of Directline's assets aims to mitigate some of the financial impacts, though the sudden cessation of Directline Assurance's insurance services has left many in uncertainty.

Billionaire and Media Mogul Dr. S.K. Macharia.

Directline entered the Kenyan market in November 2005 as a motor vehicle insurance provider and offered insurance coverage for Public Service Vehicles (PSV).

Directline Assurance, a significant player in Kenya's motor insurance market, notably closed 2023 with Sh1.66 billion in gross premiums from motor commercial PSV insurance, capturing a 60.79% market share. Despite its dominant position, Directline experienced underwriting losses of Sh576.22 million in the first half of 2023, exceeding the Sh311.88 million loss for all of 2022.

The company's sudden closure raises concerns about industry stability and regulatory oversight. Dr. Macharia criticized the Insurance Regulatory Authority (IRA) for not taking timely action against former directors, highlighting potential gaps in regulatory enforcement and financial management within the sector.

However, on its part on Tuesday 11th June, the Insurance Regulatory Authority has stated that Directline Assurance remains operational, despite the company's announcement of its closure.

IRA Chief Executive Officer Godfrey Kiptum.

IRA Chief Executive Officer Godfrey Kiptum said that the Authority has acknowledged the communication from S.K. Macharia, issued through Royal Credit Limited, concerning the operations of Directline Assurance Company Limited.

"The purported actions are null and devoid of any legal effect and as such the insurer continues in full operation as licensed and approved by the Authority," Kiptum declared.

"The purported transfer of the assets of the insurer to any third party is therefore null and void ab initio."

He stated that all policies issued by Directline Assurance Company Limited remain fully valid and in effect.

He added that the insurer remains liable for any claims arising from these policies.

"All policyholders of the insurer may continue with their operations in accordance with their insurance contracts," he said.

Kiptum emphasized that the Authority holds the exclusive statutory mandate to approve, suspend, or cancel the operations of any insurance company in Kenya.

He noted that this duty cannot be usurped by any unauthorized party.

Kiptum also mentioned that the insurer has been placed under heightened surveillance by the Authority.

"The Authority will take necessary steps as may be appropriate, pursuant to the provisions of the Insurance Act, CAP 487 Laws of Kenya, to ensure the sustainability of the insurer and protection of insurance policyholders’ interests," he said.

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