The Kenya Pipeline Company (KPC) management was at pains to explain how an insurance company was offered a lucrative insurance deal when it had not taken part in the tendering process.
KPC’s acting Managing Director Hudson Andambi said he could not confirm if Africa Merchant Assurance Company (Amaco) was legally engaged. He revealed Amaco was introduced as a co-insurer a month after the tender for the company’s overall insurance was awarded to Co-operative Insurance Company (CIC).
The hiring of Amaco was conducted during the tenure of the former Managing Director Joe Sang who, together with other former senior managers, have since been charged in court.
Tender process
Mr Andambi, who was appearing before the Senate Energy Committee alongside Petroleum and Mining Cabinet Secretary John Munyes, said he would have to look at the advertisement that called for tenders afresh and the regulations guiding the insurance policy to know if it was legal to engage a co-insurer without going through the tender process.
He told the committee that CIC, which had won the tender for the policy on Industrial All Risk and that of Terrorism and Sabotage, could have realised the risks involved in insuring KPC were very high and sought to co-opt Amaco to spread the risk.
These policies cover losses and destruction of all operations and installations of KPC, including pipeline, terminals, pump stations, storage tanks and other ancillary facilities.
“I don’t know if what was done was legal or not. I may first need to look into the entire process from the point at which we placed the advert. What I can confirm is that Amaco was introduced in September while the award was given in August. It was after the award was given but before the contract was signed,” said Andambi.
Munyes said the procedure of picking the insurer was followed until the point at which Amaco came into the picture. He was however non-committal on the legality of otherwise of the deal.
According to the insurance deal, CIC was to cover 70 per cent while 30 per cent of the cover was to be undertaken by Amaco. The cover was to run from July 1, 2016 to June 30, 2019.
Committee Chairman Nyeri Senator Ephraim Maina directed KPC to relook at how Amaco was engaged and furnish the committee with information on whether the process was lawful.
“We appreciate the fact that no single company can handle the kind of risks involved as this is very huge risk but we want you to go back and check the process and tell us if what was done was lawful,” said Maina.
Other senators who questioned the legality of the process were Ledama ole Kina (Narok), Mithika Linturi (Meru) and Ochillo Ayacko (Migori).
KPC also revealed that CIC declined to pay them a Sh1 billion claim over the controversial spillage of oil, allegedly due to adverse media reports.
Instead, Andambi said the insurer only offered them Sh100 million as ex-gratia payment for the loss.
Maina questioned why the company has not hired the services of an adjuster to help them get more from the insurance company and avoid passing the burden to consumers.
