NAIROBI, Kenya, Jan 19 – The insurance industry is set to introduce a product to cover political risks in two month’s time.
Kenya Reinsurance Company Managing Director Eunice Mbogo says unfolding political events in the country and the region in the recent past justify the need for such a cover.
Mrs Mbogo noted that during the post election violence that rocked the country last year, the insurance market followed the dictates of international practice to quickly nullify liability on the basis of political risks exclusion, with the exception of one or two companies that paid up.
“But having one or two companies offering this product is not an option because the industry would need a critical mass to make such a product affordable to the masses and thus more attractive and sustainable,” Mrs Mbogo pointed out.
She noted that the best way to introduce such a product in the market was not to make it compulsory but to make it affordable so that the critical mass subscribes to it, making it viable.
Mrs Mbogo was speaking during a forum of the Eastern and Southern Africa Insurers to discuss the issue of the introduction of such a product within the region.
However, South Africa already has such a product in the market.
Sasria, a company owned by the SA government, offers this kind of cover and it has remained profitable for the more than 30 years it has been in operation.
“This has been made possible by the fact that all members of the South African Insurance Industry are members, giving us the critical mass that has made it possible for the company to have enough money to pay for whatever claims and remain profitable,” explained Phyllis Mabasa, the Managing Director.
Speaking in the same function, Chief Executive officer Insurance Regulatory Authority Sammy Makove observed that while traditional insurance cover takes care of economic risks, the society is left to deal with political uncertainties because of its sheer magnitude and exposure.
“Sometimes, however, it’s difficult to draw a line between political insurgencies as defined in an insurance contract and mere disturbances which are covered. These unclear grounds may leave our insured confused and at a loss,” Mr Makove said.
He reiterated the need to come up with a political cover that suits the African environment noting that often times, conditions and terms of insurance and reinsurance are written by people sitting in some European city, with no clue as to the African region’s socio-political environment.
“While not judging or at the least condemning the industry, the question we should all ask then is whether there is a solution to this risk which seems phenomenal on the African stage,” he said.
Mr Makove added: “Whereas the African Trade Insurance Agency (AITA) offers some possible solutions, the local and regional industry should consider developing a product that may offer or be a solution instead of running away from the same.”