Markets & Finance

Battle for insurance cash stalls Westgate business recovery

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Mr Alex Tranchtenberg, Westgate Shopping Mall director, testifies before the Committee on Rapid Restoration of the Westgate Shopping Mall at Charter Hall, Nairobi, Wednesday. The mall was attacked by terrorists last year. Photo/SALATON NJAU

Sharp differences between owners of Nairobi’s Westgate Mall and a local bank have stalled the recovery of businesses that occupied the building before September’s deadly terrorist attack, a committee inquiring into the matter was told Wednesday.

Alex Trachtenberg, a director in the company that owns Westgate, told the Committee on Rapid Restoration of Westgate business chaired by Nairobi Governor Evans Kidero that KCB had refused to release Sh600 million that KenIndia Insurance paid in lieu of the terrorism cover the owners had taken for the building.

Westage is owned by Sony Holdings, a trading company in which Mr Trachtenberg has a significant interest.

KCB has laid claim on the money so far paid into Sony Holdings’ account, citing an outstanding loan that Westgate’s owners have with the bank.   

“We cannot really say how long it will take to restore Westgate because KCB has laid claim on the money so far paid and was earmarked for restoration,” he told the committee.

The terrorism cover protected Westgate’s owners against loss of income, third party liability and restoration of the building in the event of an attack.

READ: Westgate attack to cost insurers over Sh10bn in claims

Mr Trachtenberg said that of the total sum insured, Sh400 million covered loss of income segment of the risks while the remaining portion covered third party liability and restoration.

“Cash from the loss of income claim is what should be used to pay the bank’s loan but we are yet to receive that money to date,” he told the committee.

The businessman told the committee that Sony Holdings had an existing loan with KCB and had never defaulted on the payments by the time of the attack.

“We never failed to meet our obligations with the bank on a monthly basis from the day we took the loan up to the time of the attack and even after so we don’t understand why they are behaving like this,” Mr Tranchtenberg said.

The businessman described the bank’s action as insensitive to the predicament of businesses that suffered immense losses in the wake of the September 21 terrorist attack.

“When you go to a doctor and you are bleeding they are obliged by the Hippocratic Oath to stop the bleeding first before any other consideration and the same principle should apply for the bank,” he said.

It was not possible to determine how much money Sony Holdings owes the bank as our calls and text messages to Sidi-Odhiambo, the banks corporate communications manager, went unanswered.

Dr Kidero had ruled at the committee hearings that details of the loans were a matter that did not have to be made public but asked the parties to provide the information in their written submissions.

Westgate collected Sh1 billion in annual rental income by the time of the attack.

Mr Tranchtenberg said KenIndia had paid out Sh600 million for restoration of the building, which KCB had refused to release.

Mr Tranchtenberg told the committee that delayed restoration of Westgate is costing its owners and businesses that occupied it Sh100 million a month — meaning the cumulative losses for the five months since the September attack now stand at Sh500 million.

READ: Westgate investors want a slice of Sh6bn Uwezo fund

The businessman said the process of hiring assessors and receiving tenders for the restoration work could only begin once differences between Sony Holdings and KCB are settled.

He, however, maintained that it would take at least two years for business to return to normalcy at the mall upon completion of restoration works.

“Even with the restoration of the mall it will take about two to three years before we can get back to normal revenue streams,” Mr Tranchtenberg said.

The total loss, he added, would be more than Sh3 billion “because we are not going to do the same things and it will cost us a lot of money to change the design of the building and redevelop the Nakumatt side that was destroyed by the fire.”

The committee ended its public hearings but will continue receiving written submissions from the public until Friday.

Mr Tranchtenberg testified a day after the insurance industry came under stinging criticism for its handling of Westgate claims.

Most businessmen who appeared before the committee admitted not having taken up terrorism insurance, but said claims they have so far made were being handled unprofessionally.

“We submitted our claims but to be honest we have had a very hard time getting their attention, getting the assessors or even getting feedback from the assessors. It has taken many months, many e-mails to get a response,” said Nathalie Houben of Pep Intermedius, a mobile money intermediary that operates in Nakumatt stores.

A number of businesses that had taken the terrorism cover such as Bata have yet to be paid, the committee was told. 

Dr Pushpa Sachdeva who owns Smile Specialists, a dental clinic, said that despite losing about Sh30 million, she had only received Sh5 million from her insurer.

The remaining amount has been classified as consequential losses that are not covered in the terrorism insurance policy.