Westgate attack heralds higher insurance costs

George O. Otieno, African Trade Insurance Agency's chief executive. Photo/FILE
George O. Otieno, African Trade Insurance Agency's chief executive. Photo/FILE 

Companies are set to pay higher insurance premiums to cover their operations against the risks posed by terrorism and political violence in the wake of the attack on Westgate mall.

Insurers say Kenya’s risk profile has risen after a number of local and international insurers were left with a Sh6.7 billion claim from owners of the damaged mall.

Westgate shopping mall where 67 people died, suffered major damages, with several floors caving in. More than 50 businesses are facing major losses from business disruption and damaged goods.

Many business owners had by Thursday no idea of how much stock they lost in the ensuing battle to rid the complex of the invaders.

“In this environment, the premiums are likely to be higher than at other times but over the long term once things settle down, the premiums should remain moderate,” said George Otieno, the CEO of African Trade Insurance Agency (ATI).

ATI and Lloyd’s of London, a group of 80 UK-based insurers, were the lead players in a consortium that covered Westage mall that is owned by Sony Holding Ltd.

Mr Otieno said Lloyd’s will absorb most of the Sh6.7 billion loss, with ATI and a number of local insurers also paying millions of shillings to settle the huge claim.

“From the insurance perspective, this is significant because Westgate mall, like many other such large structures, is a risk that was shared among many local and international insurers,” Mr Otieno said.

He added that the figure of Sh6.7 billion, the sum assured, may change since a proper assessment is yet to be done.

Besides raising insurance premiums, the terrorist attack is expected to hurt economic growth and Kenya’s credit rating in the short term, raising the possibility of the country borrowing a planned Sh174 billion at higher rates from international lenders.

Analysts led by ratings agency Moody’s say key sectors like tourism are likely to take a beating from fretful visitors and investors.

Mr Otieno said the Westgate incident is likely to see more owners of commercial buildings take covers against similar risks.

“With this recent terror incident, it wouldn’t be surprising to see a more rigorous uptake of this insurance cover in the near term,” he said.