The shutdown of Kenya’s Directline Assurance was connected to an alleged attempt by media mogul Samuel Kamau (SK) Macharia to avoid a probe into an unauthorised $3 million (KES400m) transfer to a company he controls, according to court filings by the Insurance Regulatory Authority (IRA) seen by TechCabal.
$3 million was wired to Toy and Suna Holdings Ltd from Directline’s Diamond Trust Bank account on May 16, court documents 4 showed. The regulator alleged the transaction was a scheme to defraud policyholders and beneficiaries of the company.
Samuel Macharia’s office did not immediately respond to a request for comments.
The IRA alleged Macharia moved the millions “purportedly to finance the development of stalls and low-cost housing at the Toy Market” in contravention of existing regulations.
“Section 191(2) of the Act prohibits insurers from engaging in any business other than the business for which they are registered. It is apparent on the face of the record that the subject transaction is not insurance business and is, therefore, a breach of the insurer’s license terms,” IRA said in its application.
One person with direct knowledge of the matter claimed Macharia, fondly referred to as SK, hurriedly closed the insurer after the regulator flagged the transaction and moved to court.
“The board 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 announced on Citizen TV, a leading Kenyan news outlet he owns through Royal Media Service (RMS).
The unexpected closure caused panic among policyholders who stood to lose $15.4 million (KES2 billion) in unpaid claims and threw staff and agents into limbo. The Insurance Regulatory Authority (IRA) stepped in and revoked the decision.
“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. The purported transfer of the assets of the insurer to any third party is therefore null and void ab initio,” said Godrey Kiptum, IRA chief executive.
This latest standoff adds to the list of feuds Macharia has had with the regulator and other directors in the company. Since 2018, IRA has maintained that the billionaire and his associates do not own a controlling stake, a position he disputes.
IRA shareholder register shows that Macharia through RMS owns 10% in the underwriter, while four other investment vehicles hold a 20% stake each. In 2019, Macharia challenged this position in court, claiming that his family owns 20% while AKM Investments, a company owned by his son who died in 2018, holds a 48% share.
But Macharia’s claim was in breach of the regulator’s shareholding limit that caps individual stake in insurers at 25%. The matter is still pending in court.
