Blue Shield Insurance Company will need to overcome the challenge of changing its ownership structure and deal with pension issues of former workers before resuming business.
The firm is also required by regulators to raise Sh620 million. Those familiar with the company’s operations say these issues would determine whether its revival takes place.
If it overcomes the three hurdles, the firm will join Invesco Insurance in making a comeback to normal business after being placed under statutory management.
Reliable sources said the Insurance Regulatory Authority had arranged a meeting with the shareholders on Tuesday at the regulator’s offices to discuss the way forward but the meeting did not take place.
The shareholders are required to raise the Sh620 million to enable the company to resume business and operate within the regulatory framework.
The workers’ pension scheme is owed Sh222 million. The company had 230 workers employed directly and another 1,000 indirectly engaged.
According to a preliminary report on the financial status of the company up to 31 December last year and which was handed to the Insurance Regulatory Authority, the firm has a shortfall of Sh23 million in liquid capital and Sh597 million in solvency thresholds.
The company, which was underwriting motor vehicle risks, has outstanding claims amounting to Sh2.2 billion and other creditors are owed Sh200 million in addition to Sh100 million in unpaid taxes.
In recommending the revival, the regulator considered that the insurer owns prime properties that include its headquarters and land in Upperhill, Nairobi, worth an estimated Sh1.7 billion.
An audit report that covers the period to September 2013 indicates that explanations are required on the state of some of these assets that include leases and vehicles totalling Sh697 million, which are said to have been transferred to individuals but retained on the company’s balance sheet.
If the assets were recovered, the company would be able to pay all claims, leaving only the Sh100 million taxes unpaid.
An audit report conducted in 2010 showed a depreciation in the property value at Sh397 million. This could not be explained as no sale of the company’s vast assets was apparent.
Shortly afterwards, in September 2011, the company was placed under statutory management after three managers appointed in 2009 to assist the management at the time to improve governance resigned under unclear circumstances.
Trouble for the insurance company started in 2009 when it failed to pay claims to policy holders, prompting IRA to appoint three statutory directors to the board to improve governance and provide a strategic direction.
The directors did not last as they experienced challenges in performing their role. The regulator appointed Mr Eliud Muriithi the statutory manager in September 2011 to probe the firm’s affairs and chart the way forward.
