Political Risk Insurance
Political violence is a significant risk in many parts of the developing world, endangering people’s lives, homes and livelihoods.
When MicroEnsure was opening its new microinsurance brokerage in Kenya it conducted research with the borrowers of a number of microfinance companies. The borrowers expressed concern about the risk of losing their businesses and possessions during the rioting and looting that had recently become a part of Kenyan elections.
As a result, MicroEnsure incorporated the option of political violence cover into its credit life insurance. The insurance covers the outstanding balance of the loan in the event that the borrower’s business is destroyed as a result of political violence or riots.
This is the only microinsurance available in Kenya that provides this protection.
MicroEnsure's standard credit life, funeral and disability package in Kenya costs between 0.7% and 1.2% of the loan depending on the number of borrowers in a group. The addition of political violence cover costs KSH 100 (approximately $1.20) per loan irrespective of the loan value or period. MicroEnsure is working with a number of microfinance lenders who offer this product to their borrowers.
The need for this insurance is clear to clients like Ruth. Ruth was a victim of the political violence which rocked the nation after the 2007 presidential elections results were announced. She and many other people lost their business properties, homes and land through burning and looting. It was a terrible time with much bloodshed and destruction of property.
Ruth and hundreds of others from the Rift Valley province had no alternative but to seek accommodation at the Nakuru Afraha Stadium for the next six months. Fortunately, Ruth was able to stay with a friend’s family in another part of the country for one year.
In 2009 she got married and came to Nairobi to open a shop with her husband. “In 2007 I lost everything. When starting my life over again, I had to start with buying a spoon. The violence left me with nothing; it took me three years to get back on my feet,” said Ruth.
Ruth is now a member of SISDO, a microfinance institution, and is able to take loans to stock her shop. SISDO provides political violence cover to its clients in partnership with MicroEnsure. Ruth was very pleased to hear about the political violence cover offered with the loan: “I have no fear of what will happen in 2012. I can grow my shop and improve my life and that of my family. This cover gives my husband and I peace of mind should there be a repeat of the 2007 political violence.”
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