Got Political Risk Insurance for your Business?

Political InsuranceThe President of the African Insurance Organization (AIO) Israel Kamuzora is encouraging entrepreneurs in Africa to purchase political risk insurance coverage given the risk associated with many unstable governments in Africa.

Kamuzora said that if well utilized, the political risks coverage would safeguard both domestic and foreign investments in Africa. “Investors will be assured that their businesses will be taken care of in the event something bad happens,” said Kamuzora.

The Political risk insurance policy covers assets destroyed in the event of civil war or any political oriented unrest. As a result, they are not covered by standard insurance policies due to the high risk involved coupled with high premium costs.

However, Kamuzora challenged entrepreneurs that given the high premiums involved with political coverage, companies ought to pool resources together to spread the cost and still benefit from coverage.

His sentiments come after several countries across Africa have experienced political turmoil after a disputed general election, a coupe, propaganda’s or unpopular policies imposed to their citizens. Speaking at the same forum, where insurance stakeholders from Africa were meeting during the 15th African Reinsurance Forum held in Nairobi, the Deputy Prime Minister and Minister for Local Government, Hon Musalia Mudavadi welcomed the move saying innovative insurance offers would be key in growing the sector and the economy at large.

Musalia said that a lot was supposed to be done in the sector to ensure groups like farmers and Jua Kali sector, which have been neglected, can easily access insurance services. Hence, due to the large population that relies on the two sectors; Jua kali and Farming, as their source of livelihood, would access insurance services making the sector vibrant.

“For now, the long term ultimate solution in Africa is to put in place structures and governance systems that help underpaying business,” he said, adding, “It would give equal opportunities to generate goods and services to cater for the ever-growing population stress-free.”

“As a result of many opportunities that are opening up in Africa, there has been renewed interest of investors willing to come to Africa. However, the ever-changing political climate has made many investors to shy away,” said Musalia.

According to the Executive Officer of the Association of Kenya Insurance (AKI), Tom Gichuhi, Insurance firms collect averagely Kshs. 55 billion every year in local premiums for both long and short term insurance covers in Kenya. Gichuhi said that there were still many opportunities inmost Africa countries for insurers to tap and Political unrest was one of them. Industry stakeholders have argued that the sector needs to innovate and develop products targeting new market segments.

Gichuhi was optimistic that premiums collected on both general insurance and life insurance can double if Kenyans took up insurance. “With all the population in the country, only a half a Million Kenyans currently take up life insurance,” said the Executive, adding that the sector can become more vibrant if all the opportunities are also utilized.

“The sector has the ability to double the premiums if industry players could price their products fittingly and collected the premiums on a 100 percent basis,” he said, observing, “the insurance penetration is very low at this particular minute.”

Insurance experts speaking at the 15th African reinsurance forum held in Nairobi argued that there was a need for insurers to innovate and design insurance products tagged with good prices that would meet the needs of Kenyans. As a result, the development will attract and increase the number of people demanding insurance covers.

On his part, Gichohi argued that the low insurance numbers was due to the general lack of interest, lack of enough information and lack of purchasing power among the majority, with over 50 percent of Kenyans living on less than Sh70 per day.

However, following speculations by the Central Bank of Kenya (CBK) governor Professor Njuguna Ndung’u that the middle class was growing very first, coupled with an estimated 40million Kenyans, the a-half a million number of insurance clients was still far below.

Gichuhi said that most Kenyans would not look out for insurance products to buy because they cannot afford them. They also had other priorities. For those who can afford and they don’t have, they may not may not have good information on insurance. “This is why we should talk about consumer education. We need to do a lot more as an industry,” Gichuhi said.

“Investors are worried over their investments in Africa due to the unpredictable political future climate. And this makes insurance in this sector to make valuable steps in boosting investor confidence,” Kamuzora said.

“Africa is a major beneficiary of Foreign Direct Investment (FDI) from Europe, the United States and Asian countries such as China and Japan. This is a specialized business done by the business people who understand benefits that accrue from such scheme,” he said adding that the cover also benefits those investing from one country into another.

The underwriting of political risk insurance is a dynamic, growing business. As the world grows into a village, countries and companies are coming together to do business and capitalize on returns.

~by Imende Benjamin
~Photocredit: GIB

Ladybrille Magazine

Founded in 2007, Ladybrille® Magazine is a California based pioneer digital publication demystifying the image of Africans in the west through contemporary African fashion and celebrating the brilliant woman in business and leadership, with an emphasis on the African woman in the diaspora. Our coverage includes stories on capital, access to markets, expertise, hiring and retention, sales, marketing, and promotions.

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