Markets & Finance

AKI rules out compensation to Westgate car owners

vehicles

Destroyed cars at the Westgate mall in Nairobi last Thursday. Car owners affected by the attack face losses after insurers said they would only compensate those with cover against terrorism. AFP

Insurance companies will not compensate owners of motor vehicles razed at the Westgate during the terrorist attack, putting a major question mark on comprehensive insurance covers.

The Association of Kenya Insurers (AKI), the industry lobby group, holds that the comprehensive cover relates to accidents happening on the normal usage of the car, but does not include extraneous acts such as terrorism.

Acts of terror and natural disasters unless otherwise specified fall under force de majeure (beyond normal) upon which underwriters recant responsibility.

“It depends on the contract. Comprehensive insurance does not cover terrorism acts. If the insured had extended the cover to include terrorism then the claim is payable,” said the Association of Kenya Insurers in an e-mail response to the Business Daily.

This exposes shoppers at the mall to huge financial losses following the perception among many that the comprehensive cover is sufficient in the Kenyan market.

Pictures released by the Kenya Defence Forces from the part of the building that caved in during an assault on the terrorist show tens of burnt-out and mangled cars that had been parked on the upper floor.

Those in the basement are also covered by the rubble from the top floors that collapsed.

Lack of compensation will leave most of the victims of the attack staring at personal loss. Industry regulator, Insurance Regulatory Authority (IRA), said that they would give their position on the issue this week along other insurance concerns that followed the tragic happenings.

“We have received a number of questions regarding the loss at Westgate on its implications to the industry and we will be giving a response next week,” said the regulator’s corporate affairs director Noella Mutanda.

A comprehensive cover costs 7.5 per cent of the value of the car but does not cover the windscreen.

“Comprehensive covers exclude some risks — normally anything caused by riots, commotion and terrorism are excluded because they are considered as fundamental risks,” said Isaac Ngaru, a managing partner at Ngaru and Associates.

The terrorist cover costs 0.25 per cent of the car value with a minimum payment of Sh2,000. This means that only those whose cars are valued above Sh800,000 will pay more than the minimum sum.

Nakumatt Holdings, the anchor tenant of the mall, has asked those who had their cars parked there to collect them. A problem could occur if they do not find it worth their while, leaving the building owners with the unenviable task of disposing of the scrap material.

The four-day ordeal at the mall started on September 21, leaving more than 67 people dead and 175 injured. The government reported that more than 1,000 people were evacuated from the mall on the fateful Saturday.

The Kenya Red Cross said that 61 people were unaccounted for at the time but yesterday it revised the figure to 39 after some of the missing were later found alive or in the mortuary.

The Westgate Mall was insured through Sony Holding Limited, a real estate company associated with Alex Tachenberg, through London-based Lloyd’s market consortium for about Sh6.6 billion.

(READ: Westgate insurer faces Sh6.6 billion compensation bill)

Operators of the more than 50 businesses located in the mall are yet to value their losses which are expected to run into billions of shillings with the mall hosting such outlets as Barclays Bank, CFC Stanbic, DTB, Restaurants, jewelry, beauty and clothes shops.

In 2008, business people who had not taken political violence cover were at a loss after their operations were affected by the post-election violence that rocked the nation after the disputed presidential poll results.

Many of them were forced to start life afresh relying on government handouts, a situation that compelled many businesses to take political cover from insurers like ATI during the 2013 General Election.

A number of local underwriters also offered the same.