Money Markets
By GEORGE NGIGI, gngigi@ke.nationmedia.com
In Summary
- The number of policy holders dropped 16 per cent in the first five months of the year following a seven per cent rise in premiums.
- The uptake of terrorism insurance picked up following last September’s attack on Westgate Mall, making the ongoing decline a complete reversal.
- The pricing of terrorism risk has traditionally been influenced by the country rating making Kenya’s severe and frequent attacks a critical factor.
A recent decline in Kenya’s security rating has
pushed up the cost of terrorism insurance, forcing some policy holders
to drop it altogether despite rising risk of exposure, industry data
shows.
UAP insurance, one of the leading insurers of terrorism-related risks, said the number of policy holders dropped 16 per cent in the first five months of the year following a seven per cent rise in premiums.
UAP insurance, one of the leading insurers of terrorism-related risks, said the number of policy holders dropped 16 per cent in the first five months of the year following a seven per cent rise in premiums.
The pricing of terrorism risk has traditionally
been influenced by the country rating making Kenya’s severe and frequent
attacks a critical factor.
UAP general manager of operations Michael Oduor
said the pricing of terrorism risk has increased almost two-fold in the
past 18 months.
“Convincing clients to buy or renew policies at
the current prices has become a major challenge for insurers,” said Mr
Oduor, adding that the firm had lost some policy holders despite the
rise in terrorism incidents.
The uptake of terrorism insurance picked up following last September’s attack on Westgate Mall, making the ongoing decline a complete reversal.
The uptake of terrorism insurance picked up following last September’s attack on Westgate Mall, making the ongoing decline a complete reversal.
The rise in premiums has, however, become a growth
driver for reinsurers like the African Trade Insurance Agency (ATI)
which reported higher gross premiums driven by political violence,
terrorism and sabotage covers.
The company’s gross premiums rose by 47 per cent last year compared to a year earlier.
More recently, industry players have been running
media campaigns for the terrorism product that is little known despite
of having been introduced in the market in 1998.
Tom Gichuhi, the managing director of the
insurers’ umbrella body, AKI, said the association wanted to create more
awareness of the cover following painful incidents that have seen
businesses miss compensation for terror-related losses because their
insurance policies did not include terrorism.
Most victims of the Westgate attack were not
compensated because their policies did not include protection against
terror attacks.
The new risk profile has also hit motor vehicle
owners who have long regarded comprehensive insurance policy as
sufficient for all forms of risks.
But the insurers disapproved of that position when
they declined to pay for cars that were destroyed during the Westgate
attack.
The insurers argued that the comprehensive cover
relates to damages incurred during normal usage of the car and does not
include extraneous acts such as terrorism.
Acts of terror and natural disasters unless
specified in the contract fall under force de majeure (beyond normal)
upon which underwriters recant responsibility.
Insurers tried to have owners of matatus, which
have been targeted by terrorists, pick up terrorism cover with only
limited success.
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