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Marine cargo to be insured by local firms from January 2017

23. January 2017

Insurance companies in the region are now eyeing a $170 million marine insurance dividend following the Kenya National Treasury’s directive to cargo importers to insure with local insurers from January 1, 2017 when the new law takes effect. 

Cargo importers have until January to insure incoming goods with local insurance firms.

This is after the National Treasury amended section 20 of the Insurance Act to give local insurers a slice of the lucrative business.

According to the Insurance Regulatory Authority (IRA), the changes will be enforced from January 2017, with the Kenya Revenue Authority offering implementation support.

KRA will work with other shipping and maritime stakeholders to implement the relevant provisions of the insurance act.

“We will ensure goods that are brought into the country meet the requirement of the law and have transparency in the custom supply chain. We have invested substantially and by March next year we will have new customs management system. This will create import and export experience,” KRA Director General John Njiraini said.

IRA Director General Sam Makove said the amendment will help reduce the incidents associated with mis-declared cargo weights within the supply chain. Implementation of the directive will boost uptake of local marine cargo which will hasten growth in the insurance sector.

Section 20 of the insurance act states marine cargo insurance is regulated by the act, which prohibits placement of any Kenyan business on an insurer not registered in Kenya.

IRA estimates that Kenya loses goods worth over Sh7.5 billion every year while 20 percent of the containers of accidents are due to weight under declaration.

“Under section 20 of the insurance act, the placement of any Kenyan insurance business other than business insurer who is not registered under the insurance act of Kenya without approval of the commissioner, forbids insurance of imports abroad,” Mr Makove said.

Mr Makove said that by having local firms insuring the cargo, importers will have better recourse avenues should cargo be damaged or stolen.

In 2015, local insurance firms earned Sh2.7 billion from marine insurance.

Of the 49 registered firms, 35 of them currently offer marine insurance

The change in the law is expected to open up local competition as insurance firms move to capitalize.

Cargo imports are expected to increase to Sh2.2 trillion by 2020, with maritime cargo insurance premiums projected to grow to Sh30 billion annually.

At the moment, 15 insurance firms offer marine insurance but the number is expected to rise if the law is implemented.

About 90 per cent of cargo imported into Kenya is underwritten by foreign firms. Importers usually buy insurance as part of a bundled package that includes the cost of the products and shipping