Transport CS James Macharia with Resolution Insurance Group CEO Peter Nduati during the launch of accident emergency cover for commuters as Matatu Owners Association Chairman Simon Kimutai looks on/ Standard
NAIROBI, Kenya Apr 21- The Insurance Regulatory Authority (IRA) has blocked Resolution Insurance shareholders from accessing funds currently being controlled by an owner of Xplico Insurance.
Court documents have revealed that the said owner of Xplico Insurance used the funds to recapitalise Resolution Insurance before it collapsed with Sh6.5billion in client cash.
The court documents filed by Resolution Insurance owner Peter Nduati, show that New Point Capital, a UK fund owned by Keith Beekmeyer, was to provide over Sh691 million ($6 million) for investment in the Kenyan insurer by Linkham Services Limited.
Beekmeyer is also one of the shareholders and directors at Xplico Insurance, directly owning 300 shares he acquired in 2014 according to a court filing in a boardroom war for the company’s control.
The documents revealed that he was also allocated additional shares when the company created new shares that saw him transfer 29,700 shares to Jayhan Limited.
IRA stopped the deal, which seemingly looked like an indirect takeover by Xplico owners, without offering reasons.
This led to Linkham Services, Dominic Persad and Michael Cranfield injecting only half of the required funds- Sh346 million- leading to the collapse of the company.
“Upon reaching the said agreement, as a demonstration of good faith and commitment to the agreement, the 1st Defendant demonstrated proof of capital to be injected into the business and intimated that the source of the said capital would be New Point Capital Limited,” Resolution insurance founder Peter Nduati said.
“The Insurance Regulatory Authority (IRA) proceeded to approve the proposed investment, which approval was subject to the following conditions, that no monies were to be drawn from New Point Capital Limited.”
Resolution Insurance went under with over Sh6.5 billion in client cash, insurance claims and creditor debts after its shareholders failed to recapitalise the business.
The underwriter’s troubles begun back in 2017 when IRA introduced changes in the insurance law. The changes required additional capital to meet the risk of the business.
Nduati said he had approached Linkham Services to invest in the business and entered into the deal after the UK Group demonstrated proof of capital to be injected into the business. The source of the said capital was disclosed to be New Point Capital.
The transaction saw UK-based Linkham Group acquire a majority stake in Resolution after buying out LeapFrog Investments.
Nduati blamed his business partners for the trouble that led to the collapse of Resolution, claiming they failed to inject Sh346 million after acquiring a stake in the company.
He claimed the company was supposed to inject $6 million (Sh692.8 million) into the business to execute the deal with LeapFrog but only paid half the amount.
New Point Capital was founded by Beekmeyer and Andy Bye, who joined shortly after taking a shareholding and directorship.
According to the company website, the fund invests directly or through proxies depending on the regulatory environment.
“NPC acts as a Principal. However, if supporting parts of the transaction are governed by a regulated activity, we utilise our Partners and Associates to deliver these components, ensuring that full compliance with legal and regulatory frameworks is maintained in the delivery of the obligation agreed between the counterparties,” the company website reads.
It is unclear why IRA blocked Beekmeyer’s fund from re-capitalising Resolution.
However, he is embroiled in ownership fights in Xplico, which is itself experiencing difficulties in its operations.
The boardroom wars and bad business environment have seen Xplico deteriorate and is currently non-compliant with the regulator, having failed to provide books for audit during the fourth quarter of last year.
“The report includes data for all the insurers and reinsurers regulated by the authority except for Invesco Assurance Company Limited and Xplico Insurance Company due to non-submission of their returns,” the IRA said in the 2021 quarter-four report.
Matatu owners ditched Xplico, shrinking its market share of the public service vehicle industry by almost two-thirds from 21.9 percent to 7.5 percent by September last year.
The most recent IRA data shows that premiums paid to Xplico declined from Sh566 million to Sh243 million, making the underwriter the biggest loser in the sector during the third quarter.
By the fourth quarter, Xplico had the most customer complaints at 26, indicating the firm’s failure to meet customer claims on time.
