Insurers are facing a fresh surge in claims as businesses and property owners assess loss and damage from vandalism and looting that accompanied anti-government protests, coming on the heels of flooding that left underwriters with a bill of at least Sh3.15 billion.
Kenya’s underwriters say political and climate change-related risks, which traditionally had relatively small impacts on the industry, look set to disproportionately drive up claims this year, putting them in unfamiliar territory.
The widespread street protests which started as anti-tax demonstrations before morphing into anti-government demos have left a trail of death, injuries, looting and destruction of properties—all setting up underwriters for increased claims in life, medical and property.
Tom Gichuhi, CEO of the Association of Kenya Insurers (AKI), said the industry, having dealt with elevated claims from the floods that peaked in March and April, now finds themselves with protests to worry about, making the year an “unusual” one for the sector.
“This is a double tragedy to the sector because even before the ink could dry up on signing papers to settle claims relating to floods, political-related claims have started flowing in. The floods are probably behind us but insurance companies are still processing the resultant claims. Now this political risk is a new concern and we have no idea when it will completely cool down,” said Mr Gichuhi.
“There are people and businesses who have taken cover against these kinds of risks while others had not. So the moment such risks manifest, insurers are now faced with potential losses. On the other hand, there are those who now want to come in and take cover after realising how exposed they are. So we are seeing elevated claims and increased demand as well for these risks.”
He explained that the protests have hit different classes of insurance. For instance, he said, the injuries have manifested in increased medical claims, while the destruction of properties like houses, cars, and business premises has also led to increased claims towards repairs, replacement and restocking.
Insurers had settled Sh147.3 million of Sh3.1 billion flood-related claims by mid-June, according to the Insurance Regulatory Authority. The industry has traditionally faced underwriting losses in medical and motor insurance and this could rise in the wake of political protests.
Many of the underwriters say it is too early to quantify the size of political-related claims since many customers are still lodging claims for assessment. However, one of the earliest hits for insurers has come from the National Parliament, offering a sneak peek into what could be in store for the industry.
National Assembly Speaker Moses Wetang’ula said last week that the building’s insurer has assessed and agreed to settle Sh94 million in damage after part of the establishment was set ablaze and furniture broken when protesters overpowered the security team and gained access to the building.
Many more large claims are lined up given that several supermarkets and electronic shops with stocks running into millions of shillings were broken into during the protests that have mostly been by young protesters.
James Wachira, Head of Claims at Jubilee Allianz General Insurance Kenya, says since political risks tend to be spontaneous and unpredictable, it has made it difficult for insurers to plan for the financial impact.
“Strikes, civil commotion, and political violence are spontaneous and unpredictable risks. With the end and transformation of anti-government protests not known or easily predictable, insurers remain with an exposure they cannot reasonably predict or measure; it is difficult to plan the financial impact,” said Mr Wachira in an emailed response.
Mr Wachira added that Jubilee Allianz has received several property damage-related claims. He anticipates that more may come in, given that the reporting window is still open.
Britam General Insurance CEO Jackson Theuri, in an emailed response, said the insurer expects to see a surge in claims from individuals and businesses related to the aftermath of the protests that were witnessed in many counties.
“We are still in the process of quantifying the impact of the political violence-related claims, but we do expect to pay a number,” said Mr Theuri.
Many insurers from Kenya had, for the longest time, only watched from a distance as political risks in places such as West Africa unfolded and climate-related risks like forest fires and floods hit the US and many European nations. Now this has hit closer home, giving local insurers something new to think about.
However, there have been warning signs all over, with rising water levels in lakes and even occurrences like cyclone Hidaya hitting East Africa this year and several countries witnessing civil unrest in Eastern Africa.
According to Mr Gichuhi, climate change risks are going to be a long-term play for insurers, and it will require concerted efforts as the severity and frequency of occurrences like floods and droughts increase.
