The Policyholders Compensation Fund (PCF) has officially doubled the maximum compensation payable to policyholders of collapsed insurers from Sh250,000 to Sh500,000.
This policy, which takes effect from January 1, 2026, marks the first major adjustment to the compensation ceiling since the Fund’s operationalization in 2005.
This move by the Board of Trustees of the PCF, established in consultation with the Cabinet Secretary for the National Treasury, aims to restore public trust in the industry.
Formulated against a backdrop of recent industry challenges, this measure seeks to bolster confidence and provide stability within the insurance sector. The compensation, established in consultation with the Cabinet Secretary for the National Treasury, will serve as a critical recourse for policyholders and claimants of any insurance company that is placed under statutory management or has its operating licence cancelled after this notice takes effect.
Acting as a critical safeguard, this mechanism ensures that, in the unfortunate event of an insurer’s collapse, customers have a guaranteed level of financial redress, preserving the fundamental trust upon which the industry depends.
Furthermore, this regulatory update strategically aligns with broader national economic goals, particularly the National Financial Inclusion Strategy for 2025–2028. By doubling the limit, the government has harmonized insurance protections with the banking sector; the Sh500,000 cap now matches the maximum coverage provided by the Kenya Deposit Insurance Corporation (KDIC) for bank depositors.
All classes of insurance, including motor, medical, life, and property, will be affected by the new limit. It provides a critical cushion for policyholders of companies placed under statutory management or those whose licenses have been cancelled.
The memory of insurance company failures is still fresh for many. Not long ago, the collapse of firms like Xplico Insurance left thousands of policyholders in limbo, facing financial uncertainty just when they needed support the most. For those caught in these situations, the old compensation limit often felt like a drop in the bucket, particularly for complex medical treatments or significant business losses, where the shortfall could be devastating.
This is precisely why regulators see the new, higher guarantee as the right step in encouraging higher insurance penetration, particularly among low-income users and small businesses. The hope is that by promising a more substantial safety net, more Kenyans will feel secure taking that first step to get covered.
The PCF, which has grown over the years to approximately Sh10 billion, has the financial backbone necessary to support this increased payout. In collaboration with the Insurance Regulatory Authority (IRA), it hopes to foster a more resilient and inclusive financial ecosystem for all in 2026 and beyond.
