Nairobi — As the election fever grips Kenya, demand for uptake of political risks and terrorism insurance covers has increased drastically.
Statistics released last week indicated that uptake for political risk cover by the business community had increased by 50% over the last 12 months alone.
Many business operators in the country are not taking chances and have opted to cover their ventures against risk just in case the country breaks up in another cycle of election violence.
The report indicates that leading the pack in those rushing for political risk cover are companies owned by foreigners and multinationals operating Kenya especially those with business interests in areas perceived as potential violence hotspots.
According to Africa Trade Insurance Agency (ATI) marketing officer Souvik Banerjea, the 2007 bungled presidential elections offered key learning's to the Kenyan business community which lost over $100 million.
He says the situation has been worsened by the constant threat of terrorism since the Kenyan incursion into Somalia following increased attacks from the Somali militant group, Al-shabaab.
"The fast-changing political environment with the campaigns reach fever-pitch, coupled with the threat of terrorism has seen a sharp rise in those taking political and terrorism risk cover. As an industry, we believe we have the capacity to offer this service," Banerjea said.
Sources within the industry indicate that players (insurance companies) in reaction to the same have come together to form a risk pool to ensure stability just in case some are required to pay huge compensations in the likely scenario of violence.
Kenya currently has 42 companies offering insurance services. According to the industry source, 20 of them have come together to form the risk pool. Under the arrangement, the Africa Trade Insurance Agency will offer the necessary back-up to these companies.
Business people taking up the cover have however complained that the premiums charged for the service are too high given the nature of the product. They called on the government to intervene.
In every election year, insurance premiums tend to rise on basically all insurance products given the rise in risk.
The situation is worsened by banking institutions who rush to take up covers on loans given the skepticism that surrounds electioneering in Kenya.
"Most of the banks suffer the most loan default case in an election year. This explains why most come to us to insure the same," ATI Chief Underwriting Officer Jef Vincent told reporters.
The business community in Kenya is watching the developments in the political arena very closely lest they be got flat-footed as was the case in the last election. Most companies have put their business expansion plans and investment revenue on hold until after the March 4th general elections.
The government has time and again moved to assure investors that the election will be peaceful, free and fair. But this is just as far as it goes. Political parties and leading coalitions conducted their nominations last week and the election has now taken shape with just 45 days to go.