Thursday, July 25, 2024

How SK Macharia’s attempt to transfer Sh. 400 million from DirectLine failed

When Royal Media Services owner SK Macharia on Monday announced the closure of DirectLine Assurance, very few people could tell what had prompted the collapse of the most popular insurer in the public service vehicle sector.

This announcement was broadcast on Royal Media Services channels which are owned by Macharia. About twelve hours later, the Insurance Regulatory Authority came out guns blazing and termed the purported closure of DirectLine Assurance as null and void.

It has now been revealed that SK Macharia and the IRA have been fighting behind the scenes and the sudden closure of the insurer by Macharia was an outburst reaction against the IRA.

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The duo’s latest fight began on May 15 this year when Macharia wrote to the Diamond Trust Bank (DTB) instructing for a transfer of some Sh. 400 million from the accounts of DirectLine to the accounts of Toy and Suna Holdings which is owned by Macharia.

Allegedly, these funds were to be used by this company to construct stalls and low-cost housing at Toy Market area in Nairobi.

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However, the IRA was informed and moved to freeze the transfer of the millions through the courts on June 4, 2024. The IRA argued in court that DirectLine had breached its permit by engaging in business that is outside the insurance.

The IRA informed the court that as of April 2024, DirectLine Assurance had unpaid claims amounting to Sh. 2 billion. On June 6, IRA successfully obtained court orders barring the millions from being spent by Toy and Suna until a determination is reached, sending Macharia flying off the handle.

He announced the closure of DirectLine, claimed that all employees had been fired, the board of the company had been dissolved and all assets belonging to DirectLine were now being placed under Royal Credit, another company that Macharia owns.

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Macharia further blamed the IRA for failing to take action against former directors at DirectLine, who he claimed were responsible for the misappropriation of more than Sh. 7 billion of the company’s funds.

This was rubbished aside by the IRA. “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 IRA has said.

“The purported transfer of the assets of the insurer to any third party is therefore null and void ab initio.”

The IRA added that all policies issued by Directline Assurance Company Limited remain in full force and effect and the insurer remains liable for any claims arising therefrom.

“All policyholders of the insurer may continue with their operations in accordance with their insurance contracts,” the insurers regulator stated, adding that it has the sole statutory mandate to approve, suspend or cancel the operations of any insurance company in Kenya and this duty cannot be usurped by any unauthorized party.

DirectLine Assurance has been operating as the largest insurer of public service vehicles with an estimated market share of over 60 per cent. As at April 2022, data from the IRA showed that  the insurer had collected Sh. 3.1 billion to control 76.9 per cent of the matatu insurance sector.

The IRA and Macharia have been engaging in frequent battles over the past few years over the ownership and management of DirectLine.

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