How Fallout Between SK Macharia, Grandson Led To Fall Of Directline Assurance

SK Macharia
SK Macharia. [Photo/Courtesy]

On Monday, June 10, 2024, news emerged that Directline Assurance Company had ceased operations.

SK Macharia, Chairperson of Royal Credit Limited, which owns the insurance company, announced the termination of all Directline’s employees. 

He also declared the immediate dissolution of the company’s Board of Directors, with Royal Credit Limited set to take over all assets owned by Directline.

According to Macharia, the closure of Directline Assurance Company was prompted by the freezing of the company’s bank accounts by the Insurance Regulatory Authority (IRA).

In a rejoinder, IRA on Tuesday declared the closure null and devoid of any legal effect, insisting that the insurer continues in full operation as licensed and approved by the authority.

“The Insurance Regulatory Authority (the Authority) has taken note of communication released by Dr. S. K. Macharia through Royal Credit Limited regarding operations of Directline Assurance Company Limited (the insurer). 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,” IRA stated.

IRA said 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 Authority 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,” IRA added.

The regulator warned that the insurer has been placed under heightened surveillance by the authority and that the authority will take necessary steps as may be appropriate pursuant to the provisions of the Insurance Act, CAP 487 Laws of Kenya, to ensure the sustainability of the insurer and protection of insurance policyholders’ interests.

However, Business Times understands the battle is far from over, and can authoritatively report that the fall of Directline, which controls 60 per cent of insurance policies for public service vehicles, emanates from a disagreement between Macharia and his grandson Adam Kamau Macharia.

IN 2021, SK Macharia temporarily lost control of his late son’s Ksh1.2 billion, which involved DirecLine Assurance.

High Court judge Stella Mutuku revoked letters granted to SK Macharia in 2019 to administer the estate of his late son, John Gichia.

The grandson, Macharia, moved to court in May 2020 seeking to stop his grandfather from administering the Ksh1.2 billion estate.

Adam told the court that he was a minor at the time the letters of administration were issued to his grandparents and that he was seeking a piece of his father’s wealth now that he was an adult.

“The circumstances dictate that this court relooks the issues of representation in this estate afresh and make appropriate orders after hearing the parties. It is also dear to me that as at the time the two grants were issued, the sole beneficiary was a minor,” Justice Mutuku said.

The estate comprises shares in more than six companies that have investments in insurance, communications and real estate.

The companies are listed as Directline Insurance, Serenity Media Productions Ltd, Big Five Conservancy, Bushfire Media Distributors, Toi Redevelopment and Harbour Capital Ltd.

Other properties are nine vehicles — two Range Rover cars, Land Rover, Jaguar, Jeep, Porsche 911, BMW, Trailer and Land Rover Discovery, four motorbikes and five residential houses in Nanyuld, Loresho (Nairobi), Kyuna crescent (Nairobi), Kibarage (Nairobi) and Mugumo crescent (Nairobi).

Despite losing the battle, Macharia has continued to exercise control over the wealth.

On Tuesday, June 4, 2024, IRA filed an urgent application against Directline Assurance and others, alleging a breach of the Insurance Act involving Ksh400 million.

In the application, IRA sought court orders to assume control over the insurer’s assets to prevent further unauthorized transactions.

There were also allegations of unauthorized transfer of Ksh400 million by Directline Assurance directors to Toy and Suna Holdings under the guise of financing the development of market stalls and low-cost housing at the Toy Market.

Toy and Suna Holdings is fully owned by SK Macharia, the sole director and shareholder.

The transaction was flagged on June 3, 2024, for contravening Section 191(2) of the Insurance Act. The transfer also contravenes Section 47 of the Insurance Act which mandates the insurer’s assets to be held in its own name.

IRA says the transaction was potentially a scheme to defraud policyholders and beneficiaries and Directline Assurance Company.

IRA says it aims to protect policyholders owed Ksh2.08 billion as of April 30, 2024.

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