African Trade Insurance Agency (ATI) to Underwrite Terrorism Risks
NAIROBI, Kenya, June 2003 - The African Trade Insurance Agency (ATI), the continent's only multilateral import & export credit agency, has announced that it will insure facilities such as hotels and other property and assets against physical damage and other contingent and consequential losses, due to terrorist attacks within its nine member countries.
Kenya, where ATI is headquartered, has suffered three major terrorist attacks in as many decades. The most recent, in November last year, destroyed the Paradise Hotel in Mombasa, killing 16 people. The first terrorist attack to hit Kenya was in 1980 when the ballroom of Nairobi's historic Norfolk Hotel was wrecked by a bomb which claimed the lives of 15 people and wounded more than 80. The most devastating attack was when the United States Embassy in 1998 was blown up and more than 200 Kenyans died.
ATI will provide this new cover in collaboration with certain syndicates at Lloyd's of London. The cover will be made available on a stand-alone basis to both African and foreign interests. As with all the agency's products, it also seeks to extend its collaboration to those African insurers that can provide additional capacity.
ATI's Chief Executive and Managing Director, Bernie de Haldevang said "There has recently been considerable media coverage on the issue of the risk of potential terrorist attacks in certain parts of Africa, which is in one sense itself regrettable for the concerns this raises. The potential threat, whether real or perceived, is extremely damaging to the economies of our member states and indeed to all of Africa.
"Investors and company's trading in Africa need to know that they can invest in the tourist industries and elsewhere in our member countries with the assurance that they are protected in the event of another terrorist tragedy. ATI's range of underwriting facilities is growing to meet the needs of a wide range of businesses - domestic and foreign - that want to conduct trade and investment activities in Africa. The net result of the political, credit and other financial services products we offer is that Africa's growth prospects can be enhanced through greater participation in its trade by other nations".
The initiative was welcomed by Kenya's Trade and Industry Minister, Dr. Mukhisa Kituyi, who said "The agreement to provide terrorism damage cover is definitely good news for Kenya and its other partner states in ATI which have been getting jittery due to their vulnerability to terrorism threats".
ATI was established at the Common Market for Eastern and Southern Africa (COMESA) Summit of Heads of State in May 2000. Start-up funds of $105 million were provided by the International Development Association (IDA), the concessional lending arm of the World Bank, through the Regional Trade Facilitation Project, which was approved in April 2001.
World Bank funds are placed in off-shore trust accounts and are leveraged by private insurers to providing additional insurance capacity. The leverage ratio currently varies from 1:2 to 1:5. ATI became operational in April 2002 when the first 25% tranches of the IDA funds were disbursed.
ATI brings together countries willing to address the market's perception by setting up a credible insurance mechanism against losses caused by political risks, with ATI's member countries assuming financial liability for the political risks affecting trade within their own countries.
Beneficiaries will include foreign firms exporting goods and/or services to participating African countries; foreign financial institutions financing exports; and African companies from participating countries, that are exporting goods or services.
Risks eligible for cover include financial losses due to Non payment by State Owned Enterprises; Embargos; Expropriation; Government interference with entities owing insured obligations; Inability to convert or transfer currency; Imposition or increase of import or export taxes of a discriminatory nature; Interference with the transportation of goods; Seizure of Goods, Prevention of Sale, or Prevention of Export; and War or Civil Disturbance.
Eligible transactions to be insured include: Sale of goods, usually on credit terms; Letter of credit confirmation; Financial lease; Operational lease; Import/export of capital equipment for use by an insured in carrying on its business; Loans by foreign lenders; Loans by local lenders; Foreign Direct Investments; Contract/performance bonds; Import/export of goods to stock for sale; Import/export of goods for processing; and Services.