Insurance firms plan political risk cover for builders

Commercial property developers will soon have a new insurance product to cover political unrest, professional negligence and unnecessary delays in completion of projects.

The new policy—Wrap-Up—will provide compensation if political unrest leads to destruction of property as witnessed during the post-election violence in Kenya in 2008.

“The Wrap-Up insurance will reduce risk exposure, including political unrest, delay in completion of development and professional negligence so that property developers can be assured of their investment,” said Mr Joe Onsando, the Managing director of Aon Minet Insurance Brokers.

With 2012 general election beckoning, developers don’t want a repeat of 2008, which saw massive loss of property through arson.

“Every construction has its risks and the Wrap Up cover is expected to absorb all such risks, including political unrest,” said Mr Frank Ireri, managing director of Housing Finance.

Wrap-Up will also provide a single property development cover, replacing the current multiple covers or lack of cover by contractors engaged in developing property.

Currently, the various parties involved in a construction projects such as the general contractor, plumbers and electrical firms take their own insurance cover.

But such cover it is not mandatory, thus exposing the developer to substantial losses such as the collapse of buildings, loss of life and professional negligence.

Housing Finance has partnered with Aon Minet and British American Insurance (Britak) to provide the Wrap Up insurance cover.

“The construction insurance cover will eliminate duplications by providing a single cover that will lower the overall cost of building,” said Mr Onsando.

The policy is expected to protect all parties in a construction project, protect material while in transit and cover all exposures to political risks such as destruction of property.

This is expected to lower the final construction cost and reduce the final prices for properties.

According to developers, lack of insurance cover exposes projects to higher costs through provisions for unforeseen eventuality.

“Lack of appropriate insurance cover exposes projects to many risks along the supply chain hence charges are loaded on to buyers to cover for any eventuality such as loss of materials while in transit, third party liabilities and political risks,” said Laila Macharia the chair of the Kenya Private Property Developers Association (KPDA).

Housing Finance has been undertaking vertical integration across the property value chain by partnering with other parties to lower the final cost of construction.