Insurance policyholders will now receive up to Sh500,000 if their insurers become insolvent, following the rollout of an enhanced compensation policy launched Tuesday morning.
The new cap doubles the current Sh250,000 limit, with the state saying the move is grounded in actuarial evidence and is intended to provide more meaningful relief to affected policyholders during difficult transitions.
The Policyholders Compensation Fund (PCF) said a notable gap had existed in policyholder protection due to the lower statutory compensation limit, but this is now being addressed.
“I am pleased to announce that, with effect from January 23, 2026, the compensation limit has been increased to Sh500,000 per claim. This change is formalised in the Kenya Gazette Vol. CXXVIII, No. 14 (Gazette Notice No. 971, January 23, 2026),” PCF Chief Executive Officer Mohammed Sahal said.
“The previous limits were Sh250,000 (2017) and Sh100,000 (2010). Through grassroots engagement via the PCF Mtaani forum and broad stakeholder consultations, we listened and acted.”
Speaking at the Weston Hotel during the launch, Sahal said the Fund has evolved since its inception to place the policyholder at the centre of the insurance industry.
“Our mission remains to uphold confidence through timely compensation and prompt resolution of troubled insurers,” he said, adding that the Fund has made significant progress in strengthening policyholder protection and remains committed to ongoing reforms.
Since compensation began in 2021, PCF says it has disbursed over Sh358 million to 1,995 claimants across seven collapsed insurers.
The Fund has also secured legal representation for 206 policyholders facing litigation, halted 786 court executions through moratorium protections, and extended compensation to third-party claimants, who now account for more than 70 per cent of beneficiaries—many of whom are uninsured.
“Extensive discussions with the National Treasury informed this reform, which addresses social, microeconomic and macroeconomic factors,” Sahal said.
The increase is expected to raise the Fund’s coverage from about 30 to 60 per cent of average claim values.
“It also reflects industry growth, larger sums insured and higher premiums, ensuring protection keeps pace with the market. Inflation had eroded the 2017 limit, and the new Sh500,000 figure aligns with current realities,” he added.
As of December 31, 2025, the Fund stood at Sh28.7 billion, supporting the sector’s stability and sustainability.
“Looking ahead, we will strengthen policyholder protection through targeted legislative and policy reforms. We are exploring mechanisms to ensure policy continuity when insurers close—such as running off existing policies or transferring them to solvent insurers—and documenting incomplete claims to safeguard vulnerable policyholders,” Sahal said.
He also thanked regulators, safety-net players, public sector institutions and industry partners for their continued collaboration.
“I would like to thank the National Treasury for its technical and policy guidance, the Insurance Regulatory Authority for its steadfast support, and Kenbright Actuarial and Financial Services for their technical input,” he said.
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