The Insurance Regulatory Authority (IRA) has ordered billionaire businessman S.K. Macharia to keep off the affairs of Directline Insurance Company, a day after he staged a “coup” and took over its management.
Macharia, who owns Royal Media Services, imposed himself as the chairman and director, saying he was acting “in the interest of preserving the company”.
“I write to you in my capacity as a representative of the majority shareholders, namely Royal Media Services, Royal Credit Limited, S.K Macharia, P.G (Purity Gathoni) Macharia and the estate of the late Dan Karobia,” he wrote in a letter to staff dated September 3.
However, IRA has now directed all shareholders of the insurance firm, which is the largest in the PSV underwriting business, to stop with immediate effect any physical involvement in its operations.
Commissioner of Insurance Godfrey Kiptum, who doubles as the IRA CEO, directed the shareholders to comply with the Authority’s directive failure to which the Authority will take regulatory action provided
under the Insurance Act.
In a letter addressed to the shareholders, Kiptum pointed out that the alleged appointment of Macharia as the Chairman of the company is irregular and in contravention of the provisions of the Insurance Act.
After taking charge of the troubled insurer, Macharia suspended Ms Terry Wijenje as managing director, CEO and principal and appointed Isaac Ngaru in an acting capacity.
“I take over the position of director and chairman. All staff should report to their respective offices and continue with their duties as normal,” he said.
The company’s other directors are Geoffrey Radier, Kevin McCourt, James Gacoka and Elizabeth Waichigo. His son John Gichia Macharia, who died in April last year, was also a major shareholder.
But Kiptum avers the purported appointments of Chairman, Directors and CEO are not only against the Insurance Act but also the Corporate Governance Guidelines, which require that such a persons be approved by the Commissioner before they can take up those positions.
Regulator defends decision to intervene in Directline management
The Commissioner further explained that the above requirement spells out the requirements for directors and management of insurance companies and the approval process to be followed.
He pointed out that the ultimate responsibility to have control over an insurance company is vested on directors who have
been approved by the Authority and that the purported actions are outside the legal framework and thus considered null and void.
“ It is only the approved directors that have the ultimate responsibility to have control over an insurer
and the Authority, therefore, does not recognise any purported action taken to control the affairs of the insurer outside the legal framework and hence such actions are null and void,”he said.
IRA has been making efforts to find a solution to the corporate governance issues affecting Directline Insurance, including intervening in the management of the insurer as provided for under the Insurance Act by appointing three directors to the board of the insurer.
The Authority says it is mandated to protect the interests of consumers and insurance beneficiaries and the actions taken towards the management of Directline Insurance are towards ensuring that the corporate governance issues the insurer is facing do not affect the insurance policyholders and beneficiaries.