Govt Sets Ksh500,000 Limit on Policyholders Compensation Claims

The government has issued fresh directives on insurance claims, capping the amount payable to policyholders under the Policyholders Compensation Fund at Ksh500,000 per claim.

In a Gazette Notice dated Friday, January 9, 2026, the Policyholders Compensation Fund, through its Managing Trustee, Mohamed A. Sahal, stated that the decision was made pursuant to the Insurance Act (Cap. 487).

Under this provision, the Board of Trustees of the Policyholders Compensation Fund, in consultation with the Cabinet Secretary for the National Treasury, approved the new compensation limit in accordance with Section 179 of the Insurance Act and Regulation 12 of the Insurance (Policyholders Compensation Fund) Regulations, 2010.

According to the notice, the maximum amount payable as compensation on any single claim, across all classes of insurance, will now be limited to Ksh500,000.

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Treasury Caps Insurance Compensation at KSh 500,000 per Claim

The directive applies to policyholders and claimants of insurers that are placed under statutory management or whose licences are cancelled after the commencement of the notice, in line with Section 67C (2) of the Insurance Act.

“This compensation limit shall apply to policyholders and claimants of any insurer that is, after the commencement date of this Notice, placed under statutory management or whose licence is cancelled,” the notice stated.

The new rules take effect from the date of publication and will remain in force until further notice is issued. The notice was dated January 1, 2026.

Initially, the maximum compensation payable for any single claim is capped at Ksh250,000.

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About Policyholders’ Compensation Fund

The Policyholders Compensation Fund (PCF) is a state corporation in Kenya under the National Treasury, established to provide a safety net for insurance policyholders if their insurer becomes insolvent.

The primary role of the PCF is to compensate claimants from insurance companies that have been placed under statutory management or whose licenses have been revoked. It aims to enhance public confidence in the insurance sector by ensuring that policyholders do not lose everything when a company fails.

The fund also participates in the statutory management and liquidation of struggling insurers, as directed by the court or the regulatory authority.

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National Treasury Cabinet Secretary John Mbadi addressing the media in Nairobi on October 16, 2024. PHOTO/National Treasury