The Insurance (Amendment) Bill, 2023
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Strict Fiduciary Penalties for Insurance Executives
The Bill inserts a new Section 67H to hold insurer directors, shareholders, and principal officers personally responsible for mismanagement. Individuals who fail to secure regulatory compliance or who misappropriate assets face fines up to KSh 5 million and 2 years' imprisonment for a first offence, doubling to KSh 10 million and 5 years' imprisonment for subsequent offences.
Up to KSh 30 Million Corporate Fines
Under Section 67H(2), corporate entities face significant fines for failing to comply with directives, supply required information, or settle legal judgments. A first-time corporate offence carries a fine of up to KSh 10 million, which escalates to a maximum of KSh 30 million for any subsequent infractions.
Court-Ordered Compensation for Financial Loss
In addition to standard statutory penalties, Section 67H(3) empowers courts to order convicted individuals or companies to pay direct compensation to victims who suffered financial losses. The recovery amount is assessed based on either the actual loss sustained by the claimant or the profits accrued by the offender.
Removal of Capital Deposit Ceilings
The Bill deletes the proviso to Section 40(1) of the Insurance Act (Cap. 487). This removal eliminates the previous statutory KSh 3 million cap on the total deposits (including additional deposits required by the Commissioner) that general and long-term insurance businesses must maintain.
Bill No.
No. 18 of 2023
Gazette No.
Supplement No. 67
Sponsor
Kimani Ichung'wah
Background
Submitted by the Cabinet Secretary for the National Treasury as part of the 2023/2024 budget proposals, the Insurance (Amendment) Bill, 2023, aims to bolster accountability and professional responsibility within Kenya's insurance sector. By amending the Insurance Act (Cap. 487), the Bill seeks to ensure senior executives and shareholders take responsibility and face severe liability in the event of an insurance company's failure or misconduct.
Key Amendments
- Section 40 (Deposits): Deletes the proviso to subsection (1). This removes the restrictive KSh 3 million deposit ceiling for general and long-term insurance businesses, giving the Commissioner greater flexibility in requiring additional deposits to secure policyholder interests.
- Section 70 (Management Expenses): Amends subsection (2) by deleting the word "advisory" to refine how the Commissioner consults with the Board on relaxing management expense limits.
- Section 150 (Terminology): Updates the marginal note of Section 150 to replace "surveyors" with "insurance surveyor".
New Obligations
Under the newly introduced Section 67H, any shareholder, director, principal officer, or management staff member of an insurer is legally obligated to:
- Secure the compliance of registered or licensed persons with the Insurance Act.
- Ensure the accuracy and correctness of all statements and reports submitted under the Act.
- Supply requested information and effect directives issued by regulatory authorities.
- Settle court judgments and policy claims without waiting or raising unlawful justifications.
- Avoid taking, converting, or pledging any property of the insurer for personal use or the use of an associate.
Penalties
Section 67H(2) introduces severe penalties for failure to meet these fiduciary obligations:
- First-Time Offences:
- Individuals: A fine not exceeding KSh 5 million, imprisonment for up to two years, or both.
- Companies: A fine not exceeding KSh 10 million.
- Subsequent Offences:
- Individuals: A fine not exceeding KSh 10 million, imprisonment for up to five years, or both.
- Companies: A fine not exceeding KSh 30 million.
- Compensation Orders: Courts can additionally order convicted offenders to pay compensation based on the actual loss sustained by the claimant or the profits accrued by the offender.
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