13 June 2008
Nairobi — Insurance companies are expected to settle their claims within 90 days failure to which they will face consequences that include closure, Finance Minister Amos Kimunya has said.
In a move that further strengthens the market regulator, Mr Kimunya gave the Commissioner of Insurance powers to levy a penalty of five per cent of the amount awarded by a court if the insurer does not pay it within 90 days.
"To further deter such habit of failure to honour such claims, I propose to give powers to the commissioner to initiate a process of winding up such a company in the event that it fails to pay both the awarded amount and the penalty within the stipulated period," Mr Kimunya said.
The minister said some insurers had delayed or failed to pay claims altogether, even when a court has ruled in favour of the insured.
However, he increased the level of investment by the insurers in shares of listed companies, debentures or corporate bonds from five per cent to 10 per cent.
The new rules are part of a number of policy measures targeting the financial sector that the Finance Minister proposed in his speech.
However, small banks, which got a reprieve last year when Parliament shot down proposals that could have forced them to merge, got a rude shock when Mr Kimunya re-introduced them.
Among the re-introduced proposals is the increase in core capital of banks and mortgage financial institutions from Sh250 million to Sh1 billion over a period of two years.
"This is aimed at transforming many small banks in our economy into fewer, larger and stronger ones," Mr Kimunya said.
The minister gave the Central Bank of Kenya powers to levy penalties on rogue forex bureaux that flout its guidelines.
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