Now APA to Offer Political Risk Cover for Kenya, Uganda Firms

Nairobi, Jan 25, 2010 (The East African/All Africa Global Media via COMTEX) -- APA Insurance Company has become the third Kenya-based insurer to enter into a reinsurance arrangement with the Africa Trade Insurance Agency to offer covers against political violence in the region.

The firm has entered into a $434 million reinsurance deal with ATI that will see small and medium enterprises in Kenya and Uganda benefit from the cover against political violence, terrorism and sabotage. It will be offered as an added benefit to its policyholders in the two countries.

The two firms currently offering insurance covers against political unrest are UAP Insurance Company and Jubilee Insurance Company.

UAP was the first to roll out the product in 2008; and last year, Jubilee signed a $384.6 million deal with ATI to provide the cover to businesses in Kenya, Uganda, Tanzania, Mauritius, Burundi and Rwanda.

In the latest arrangement with APA Insurance, ATI will act as its reinsurer, absorbing over 90 per cent of risk underwritten on resulting claim.

Next stop: Tanzania

While the product will be provided by the firm's subsidiary in Uganda -- APA Insurance Uganda -- plans are underway to introduce this product in Tanzania where the firm operates through an associate, Reliance Insurance.

APA chief executive Ashok Shah said that though Tanzania has a much lower risk of losses arising from political violence compared with Kenya and Uganda, his firm would present a proposal to the board of directors of Reliance Insurance, where it has majority shareholding.

There has been growing demand for insurance covers against political violence and terrorism in the recent past.

African Trade Insurance Agency acting chief executive Stewart Kinloch attributed this trend to the trickle down effects of the global financial crisis, where competition for dwindling resources increased the risk of political stability and violence, due to unmet needs.

"The fact that the two companies are still retaining the product means that its uptake is good," Mr Kinloch stated.

The decision by APA Insurance to provide insurance cover against political violence follows bitter lessons learnt from the 2007/8 post election violence.

The firm settled claims from its clients in Nairobi, Mombasa and Western Kenya to the tune of $666,670.

"We made the payments from our own resources as there was no reinsurance cover therefore APA shouldered the entire expense," Mr Shah said.

Thus, he argued, such a cover was important, considering the post poll chaos in Kenya, the common talk of terrorism exposure, and "the complex shape that regional politics is taking."

Mr Kinloch said that insurance companies were responsible for assessing risk and planning for probabilities.

Already, ATI is in the process of negotiating additional political violence reinsurance deals with insurance companies in Kenya and Uganda, as well as other markets that have experienced civil unrest in recent months. The announcement of the negotiations' outcome is planned later this year.

The need for insurance covers for businesses against political unrest, terrorism and sabotage has increased in the recent past. Such covers will not only translate into investment flows to the region, but also enable businesses to expand into areas that are considered high risk.

Already, the Association of Kenya Insurers has joined hands with other players across the continent to develop insurance products for special risks like terrorism and political risk, which will later be released to insurers for marketing.

The Kenyan insurance industry and the government are also in the process of putting together a joint political risk insurance company.