Banks take Sh15bn cover for potential election damages [Business Daily (Kenya)]

(Business Daily (Kenya) Via Acquire Media NewsEdge) Kenyan banks have taken up political risk insurance cover in excess of Sh15 billion reflecting fears of a repeat of the 2008 chaos and a run on deposits as customers raise their cash holding during the electoral process.

The lenders have taken up political risk insurance covers protecting themselves from chaos-related losses which five years ago included vandalism, business closure and accumulation of bad loans following destruction of property, businesses and displacement of borrowers.

"African Trade Insurance (ATI) covered African banks for transactions totalling Sh17 billion in 2012. Of these Kenyan banks represented 90 per cent or Sh15.9 billion. In 2007 there were no Kenyan banks included," said George Otieno, the CEO of ATI in an interview on Monday.

The insurer said that total political risk cover for African banks in the run-up to the 2007 election was worth Sh8.2 billion, none of which was taken by a Kenyan lender.

Mr Otieno said ATI had also seen an increase in business from international banks seeking protection on their letters of credit confirmation.

"In view of what happened there have been a lot of innovations with insurance companies coming up with products that address the risks," said Mr Habil Olaka the CEO of Kenya Bankers Association.

Apart from taking up insurance covers banks have also put in place contingent plans which include evacuation of their personnel in case of violence.

"We have recovery process in place that if need be can be activated which involve hotels, airlines and transport companies," said Ngumo Kahiga the head of marketing at Co-operative Bank.

The two are however optimistic that the country will not slide back to the post-poll violence of 2008 as the country has a new Constitution and revamped Judiciary that enjoys public confidence.

(Read: UN confident in peaceful March polls) "We have been opening new branches which underline our confidence," said Mr Kahiga. Retail outlets have also taken up political insurance cover among other precautionary measures following vandalism and theft that accompanied the chaos.

"We are in discussion with security teams so that they deploy more forces and have taken political insurance covers," said Willy Kimani, head of marketing at Naivas Supermarkets.

Following the 2008 chaos the Central Bank of Kenya issued policy guidelines to banks to ensure there was no disruption of services. Banks will be riding on alternative channels of banking such as ATMs, mobile and Internet banking to ensure continued service delivery in case of chaos.

Despite the assurance some people are opting to withdraw the money for use in case of chaos for crucial services which include travelling, boarding in secure hotels, and communication.

Mobile service provider Safaricom said it would ensure its mobile money platform, M-Pesa, was not disrupted during the period in which it anticipates high demand similar to that of Christmas festivities that peaked at 10,000 transactions per minute.

"We have prepared the M-Pesa platform and our dealer network to deal with the increased demand for service," said Nzioka Waita, the company's director of corporate affairs.

Consumer lobby group, Cofek, advised the public not to panic, pointing at peace promises given by presidential candidates during national prayer services over the weekend.

"It's true there are those fears and they are real but we are telling people to stop panic buying of stocks and holding of cash," said Stephen Mutoro, CEO of Cofek.

Some sources within the banking industry said that branches in hot spot areas had been supplied with wood panels to cover glass windows and were planning on operating with skeleton staff numbers.

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