Insuring property can cushion against damage by floods - Daily Nation

Trend yet to catch on since people are a bit apprehensive

Thursday May 17 2018

A resident of South C in Narobi, which is prone to flooding. Heavy rains often leave a trail of destruction in the area. PHOTO| FILE| NATION MEDIA GROUP

A resident of South C in Narobi, which is prone to flooding. Heavy rains often leave a trail of destruction in the area. PHOTO| FILE| NATION MEDIA GROUP 

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From the images of women standing for hours  holding their babies tightly in their flooded homes in Mukuru kwa Reuben in Nairobi to the gory images of Solai village in Subukia, Nakuru County, the raging waters from the ongoing rains have caused pain and destruction across the country. 

In early May, the International Federation of the Red Cross and Red Crescent Societies estimated that 100 lives had been lost in the floods. At the same time, the United Nations estimated that 244,400 people had been displaced in various parts of the country, most of them in Tana River, Kilifi and Mandera counties.

These  numbers do not include the casualties of the Patel Dam tragedy. The  floods have washed swept away people and animals,   caused injuries, swept away houses and vehicles, and devastated farms. Bridges have caved in, and roads rendered impassable in various parts of the country.

In the Patel Dam tragedy in Solai village that  hosted about 60 homesteads, 70 million litres of water released when the dam’s walls gave way cascaded towards the residents homes, formed a powerful wave about a metre-and-a-half high that destroyed everything in its 500-metre-wide path. More than 40 people were killed, among them  20 children.

By the time we went to press, an estimated 2,500 people were displaced, 41 still in hospital, and  40 others still unaccounted for. This is the tragic picture of floods in Kenya in recent years –  very costly indeed.

Unfortunately, the cost of the destruction by  floods keeps rising every year.

“We can only quantify the damage following an assessment after the event. For instance, following the 1998 bombing in Nairobi, we got to know

of the actual casualties much later, after police investigations,” explains Eliud Adiedo, the chief executive officer,  Association of Insurance Brokers – Kenya.

In March, a section of the upmarket Green Park Estate in Athi River got flooded after Stony Athi River burst its banks.

The development sits on land formerly owned by the East African Portland Cement company. The 10 houses that were affected lie in phase one of the Superior Homes project. Residents whose houses were flooded, said that they lost important documents, food, bedding and electronics.


And with the rains continuing, the trend could become very pervasive.

“It is not less than 30 to 40 per cent of all insured properties countrywide,” says Mr Adiedo.

However, such calamities can be avoided if property owners, especially homebuyers, were keen on the location of the property.

“It pays to view a house or land during the rainy season. That way, the buyer can note areas that are swampy,- or even volcanic, where earth gives way,” he explains. The geographical location of a house, too, informs of the nature of drainage and whether the drainage system can be remodelled. For instance, many houses in South C in Nairobi are prone to flooding whenever it rains heavily.

In areas where developers have built on Wetlands, or where dams have been built in such a manner that they pose a danger to human development and livelihoods, not many Kenyans come out to give their views when environmental impact assessments are conducted.

“Yet, they are the communities living next to such projects and worst affected when nature fights back,” notes Ms Julie Mulonga, the programme manager at Wetlands International,    a global organisation that deals with the conservation and management of wetlands.

There are other considerations that homebuyers can look out for to enhance their personal safety when natural calamities like floods strike. For instance, ground level sockets should be avoided, and other aspects of the building should meet a certain threshold of standards. “Insurance relies heavily on other professionals such as architects, electrical and structural engineers whose advice they seek, especially in instances where there is complexity of risks,” says Mr Adiedo.


For instance, to enhance safety in the kitchen, a house should have at least two doors, with one leading to the exit, in case of a fire. The ground floor windows too, should not be touching the floor level. The house should also have proper burglar proofing doors and door locks. “The doors should be reinforced,” he notes.

A restaurant should have a fire door that contains fires. “Since their business is cooking and they have an energy mix of charcoal, gas and electric cookers, the door should be one that can be shut for two to three hours to help prevent the fire from spreading, says  Mr Adiedo. In a high-rise building, there has to be an exit staircase or a helipad.

To guard against flooding when taps are left open, the kind of taps used in an open building should be such that if they are left running overnight, there is no risk of flooding. In such a case, press-and-release taps are the safer compared with the roll-to-open conventional models.

Most hotels along the coastal strip and resorts across the country have Makuti-thatched roofs. Makuti (coconut palm fronds) is popular for its aesthetic, authentic African appeal, which foreign tourists admire. However, in the event of a fire, it  is a high-risk material that easily spreads the fire, leading to huge losses within minutes.

 “It has happened before. The fire spread fast to neighbouring establishments because of the wind,” says Mr Adiedo. Seven hotels caught fire and insurance underwriters paid heavily. As a result, they reviewed their policies and decided not to insure makuti and grass-thatched roofs. At least such an establishment should have a ceiling and other roofing, with  the makuti or grass thatches being at the very  top since  this would minimise the risks,” he adds.

More  importantly, homebuyers and investors can take property insurance policies against losses as a result of floods.


Property insurance addresses human risks, economic risks and natural perils such as floods. Human risks include  theft, fire and the loss of items or damage to property through arson and such actions. Economic risks include the loss of assets as a result of the depreciation of its value.

“It is a financial loss and is also called trade risks. A good example is when a communist government decides to nationalise property,” says Mr Adiedo.

Natural perils are acts of God such as floods, earthquakes, landslides, and strong winds. Arson and theft are criminal offences but still constitute a loss to the property owner. It is an economic risk when the stock market loses value and investors lose money. In motor insurance, the vehicle is insured against road accidents, but not  loss of  value.

An insurance policy is a contract in which the insured pays a certain premium against a value of the property for a certain duration, normally 12 months.

 “Any time you acquire a property – a house, vehicle or even machinery – it is exposed to all manner of risks and that is where insurance comes in,” explains Mr Adiedo.

Floods fall into the category of perils – unforeseen occurrences. The policy-holder can claim a documentation of what they have lost. “You put supporting documents together with the estimated loss value,” he says. The underwriter investigates and arrives at a figure. This figure is compared with the claimant’s, and if there is a huge disparity, the two parties sit down and agree on a value and the claim is paid for.

In property insurance, the premiums are very low since  most underwriters take a rate and apply it to the value of the property. For instance, in a hotel building in Nairobi, the common risks could be electric faults, gas explosions, terrorism, fires and floods. “The risk of terrorism in Kenya is very real today, unlike a few years back,” says Mr Adiedo.

If the  building is worth Sh500 million, the premium on fire insurance could be 0.1 per cent of its value – about Sh50,000 per annum. The premium against fire can go up if the building were  an oil refinery, or a plastics manufacturer – which could be up to 0.9 per cent of its value.

The risk of fire also insures against water damage as the use of water in extinguishing fire might cause more damage to the food, furniture, electronics and other accessories. The insurance against terrorism could be  0.2 per cent of its value, or Sh100,000, which is also dictated by other factors such as the high exposure, especially if the hotel is located in a densely-populated area in the city centre. In remote locations like Turkana, the premium against terrorism could be 0.02 per cent of the value of the property.

Tenants can also take occupiers insurance policies to insure their property such as modified partitions, equipment and items that they risk  losing. In a mortgaged house, a homebuyer can purchase a joint insurance which is shared with the financier. In such a case, as the interest of the financier reduces, the interest of the homebuyer increases.

“Past the 50-50 position, the interest of the buyer becomes higher than that of the financier,” says Mr Adiedo.

 The homebuyer insures the stuff in the house, but upon finishing payment for the house, they become homeowners and have the legal capacity to insure both the house and its contents.

Homeowner insurance takes care of the buildings, immovable contents, all risks (movable items such as computers cameras, mobile phones and other electronic gadgets), domestic workers against injury and other liabilities (if a dog strays and bites a neighbour). This is a complete domestic package, where the buildings and immovable contents aspect covers floods, fires, explosions and aerial devices that can fall on the property and  cause damage.


The deepening of property insurance in Kenya has not gained ground since most people do not understand the “hidden” complexities involved, which many insurers  make known  only when a claim is been made.

“Unfortunately, this was the face of insurance in the past. There was a lot of fraudulence and bankruptcy. But this has changed, there is more openness and an aspect of disclosure, simpler procedures, policy terms and technology,” he says.

However, Mr Adiedo explains that most of the challenges  that come up when a claim is made are largely as a result of underinsurance.

Property owners should engage with their insurance brokers whenever they enhance or modify their property. If  those additions are not stated in the policy valuation, they are not insured. Such additions could be a house extension, a swimming pool, or any additional immovable and movable items.

“Any change can increase or decrease the risk margin. That is why it is important to engage an insurance broker to walk with you over the policy period as they can advise on which underwriter  best suits your specific needs,” he says.

When there is no disclosure by the  property owner,  the inconsistencies will be very glaring at the point of claims.

 “If you undervalue your property and the damage is higher than the initial valuation and there is no proof of modifications, there is the likelihood of a disagreement. But if the facts of the actual value and the modifications are there, the underwriter will pay for the claim, minus the depreciation,”




The damage caused by floods


Over 100 people have died in the floods across the country.

Patel Dam in Solai village, Subukia, Nakuru County - 44 dead, among them 20 children, 41 hospitalised and 40 others unaccounted for

 In Kitui, four people inside a Toyota Probox  drowned in River Enziu, following the floods, which buried the vehicle 10 metres underneath the river bed.



Over 244,400 people have been displaced, the majority of them in Tana River, Kilifi and Mandera counties.



In Tana River, a section of the Lamu-Garsen road has been rendered impassable and dangerous after parts of it and bridges at Milihoi and Koreni caved in and were swept away.



Across the country, many homes and other buildings have been washed away, while some have collapsed. At least 30 to 40 per cent of all insured buildings have been affected.



In Mombasa, 11 boreholes at the Baricho Water Works were destroyed by floods. 



In Budalang’i, at least 300 households have lost their crops after River Yala to  the south  burst its banks, delaying  the re-opening of schools for over a week in parts of Bunyala Central and Bunyala West wards.

In Katwii village in Kangundo, Machakos, several acres of maize and beans crops were submerged  are rotting. With almost a harvest of nil in some areas, there is no doubt they will need relief food  in the coming months.


The Kenya Red Cross has said that  flooding is a “humanitarian crisis” that requires emergency funding. The flooding has also resulted in cholera outbreaks, with 15 of the country’s 47 counties affected. Flooding problems have also been reported in Uganda and Somalia.

The United Nations estimates that half a million people have been affected in Somalia, with close to 175,000 displaced.

Most of the regions seriously hit by the floods are those that were recovering from a devastating drought that had severely affected 23 counties in Kenya.

There is fear that with crops destroyed by the floods, yields will  fall, leading to food shortages beyond the prevailing humanitarian crisis in these regions.