Seelan Naidoo, the head of Engineering and Construction Insurance at Allianz Global Corporate & Specialty (AGCS) advised Kenyan brokers, risk managers and insurance professionals on the importance of introducing and enhancing modern risk management and risk transfer solutions to sustain the country’s economic growth.
“Kenya’s sustained economic growth depends on closing its vast infrastructure gap in power supplies, energy, roads, bridges, tunnels or other constructed facilities such as electrical capacity or components of water supplies, sewers, electrical grids, telecommunications, and so forth which needs innovative credit and investment solutions facilitated by public private partnerships through a clear policy and legal framework. But for these plans to work, they will require equally appropriate risk management and risk transfer solutions. Insurers and brokers need to work very closely with risk managers, regulators and stakeholders within the country to adequately assess current and future infrastructure development projects to ensure they are sufficiently protected,” said Naidoo.
Innovative and responsive insurance solutions can help. “There are numerous ways to close the protection gap to mitigate risks such as business interruption, cybercrime, fire and explosion, and political violence, terrorism to name a few. Both traditional insurance and the new generation of alternative risk transfer solutions can be used to find the right responses to an increasingly complex risk environment. In essence, this involves educating all stakeholders about these risks and advising them on relevant risk management and insurance solutions,” he advises.
Merits of insurance and risks management
According to the World Bank, Kenya’s economy is projected to rise to 5.9% in 2016 and 6.1% in 2017. However, the country’s insurance penetration, which refers to premiums as a percentage of GDP, stands at over 3%, which means that it could have a significant coverage gap especially for infrastructure projects, which are essential for the continued economic growth.
The role of insurance and risks management is crucial for infrastructure projects. It gives government, the private sector and lenders the ability to diversify risk, reduce financial risk and ensure success. It also frees up capital, which can be optimally deployed into long-term projects. Overall, it ensures there is project continuity following major losses and major interruptions.