NAIROBI, Kenya Oct 5 – Businesses in Africa are being encouraged to take up political insurance cover given the risk associated with unstable governments in most African countries.
Speaking during the opening of the 15th African Reinsurance Forum, African Insurance Organisation President Israel Kamuzora said political risk cover would safeguard foreign investment in the region.
Mr Kamuzora said with investors worrying over investments made in Africa due to the ever changing political climate of the region usually coupled with political violence, insurance in this sector would make valuable steps in boosting investor confidence.
Africa is a major beneficiary of Foreign Direct Investment (FDI) from Europe and the United States.
Political risk insurance covers assets destroyed in the event of civil war or any political oriented unrest.
Such are not covered by the standard insurance policies given the high risk involved as well as the high premium costs involved.
Mr Kamuzora said given the high premiums involved with political cover, companies ought to pool resources together to spread out the cost and still benefit from the cover.
"This is a specialised business done by the business community who understand the benefits of such schemes. The cover also benefits those investing from one country into another," he said.
The underwriting of political risk insurance is a dynamic, growing business.
As globalisation increases, there are more corporations doing business in more places around the world with each passing year.
Speaking at the forum, Deputy Prime Minister and Minister for Local Government Musalia Mudavadi welcomed the move saying innovative insurance offers would be key in growing the sector.
He however said more needed to be done in insurance for farmers due to the large population that depends on farms as their source of livelihood.
"By and large the ultimate solution in Africa is to put in place structures and governance systems that help an underpaying business," he said adding it would give equal opportunities to generate goods and services to cater for the ever-growing population.
Mr Mudavadi said there was renewed interest in investing in Africa but the ever-changing political climate had made many investors to shy away.
Another scheme discussed at the forum was credit risk insurance, which seeks to cover private investments.
African Reinsurance Regional Director George Otieno said credit risk insurance could spur economic growth by attracting multinational investments into the region.