Cost of terrorism premiums could rise after hotel attack

The risk of terrorist attacks is likely to push up premiums for businesses and players buying insurance for terror-related risks compared to last year, analysts, brokers and insurers have said.

Tuesday’s attack at a hotel and business complex in Nairobi claimed the lives of at least 14 people while dozens others were injured in the attack linked to the Somalia-based Al-Shabaab terrorist group.

Mr Deepak Dave, a risk management expert with Nairobi-based Riverside Capital, projected an uptick of development of terror-focused insurance products in the wake of the Riverside raid.

“They will be hugely expensive given reinsurance will be almost impossible until our general security situation is improved dramatically,” said Mr Dave. “The government will need to play a big role to get the market off the ground”.

Kenya -- East Africa’s largest economy -- has in recent years suffered deadly gun and bomb attacks by Al-Shabaab who are demanding the withdrawal of Kenyan troops from neighbouring Somalia.

Al-Shabaab, which said on Tuesday its militants were responsible for the attack, has launched a series of terrorist operations in Kenya in recent years. In 2013, the Al-Qaeda affiliate took over Westgate, a luxury mall in Nairobi, killing 67 people. In 2015, at least 147 people, mostly students, were killed in a similar attack on a university campus in Garissa County in the northern part of the country.

Mayfair Insurance paid a total of Sh1.01 billion to Nakumatt Supermarkets, now under administration, for losses suffered at one of its branches, following the terrorist attack at the mall in September 2013.

Former Nakumatt managing director Atul Shah said the retailer’s losses were in excess of Sh2 billion in the terrorist attack that razed its hypermarket at the mall.

The attack cost another insurer, ATI, Sh128.5 million ($1.5 million) arising from three claims.

Despite Tuesday's attack, a determined calm pervaded the country.

Wednesday, a police cordon was in place around Riverside Drive, the location of upmarket Dusit-D2 hotel and complex, blocking traffic.

“Even as we regret yesterday’s incident, as Commander-in-Chief, I want to commend the quick and effective response by our elite fighting teams for neutralising all the terrorists involved in the attacks,” President Uhuru Kenyatta said in a televised address.

“We have dealt with the threat decisively, and shown our enemies and the world that we are ready to deal with any threat to our nation,” he said from State House flanked by the country’s top leaders, including the Cabinet Secretary for Finance, Mr Henry Rotich.

The President said the six attackers had been killed by security forces.