Local insurance companies will be among the biggest winners this year as the government moves to implement the mandatory local underwriting for all imports.
The new law, which came into effect on January 1, requires imports to be covered locally.
Treasury Cabinet Secretary Henry Rotich on his 2016-17 June 8 budget speech directed the Kenya Revenue Authority (KRA) to liaise with other players to implement Section 20 of the Insurance Act.
State Department on Shipping and Maritime Affairs Principal Secretary Nancy Karigithu warned that those who fail to comply will face penalties. “Enforcement of Section 20 is a legal requirement but we will walk together to ensure a smooth transition,” Karigithu said.
Marine Cargo Insurance policy provides indemnity against loss or damage for goods being transported by sea or air, and incidental land transportation.
Karigithu said cargo already en route to Mombasa and existing contracts with foreign firms will, however, not be affected until they lapse. But any cargo shipped on or after January 1 must be covered.
The new law, she said, is part of the government’s strategy to grow domestic premiums by about Sh20 billion annually, create jobs and grow the economy.
Insurance Regulatory Authority data shows local gross premiums in 2014-15 were Sh2.7 billion and Sh2.9 billion respectively. Kenya gives an estimated Sh21 billion to foreign firms annually.
Karigithu said the new regulation will make it easy for importers to make claims, as opposed to the tedious procedure when lodging claims from foreign underwriters.
“We are claiming our heritage. This will create jobs and boost the country’s insurance sector,” she said.
Industry players will use the Kenya TradeNet System operated by KenTrade to facilitate the online application of local marine covers.
Insurance firms have in the last one month been putting in place systems to comply with the new rule. Among them is giant ICEA Lion General Insurance which has unveiled an online portal and announced a cover capacity of up to Sh1.6 billion per single shipment.
“We have substantial technical and financial capacity. Locally, we have the technical capacity to produce a marine policy as good as any in the international market,” ICEA Lion General Insurance CEO Steven Oluoch said in an interview.
Other insurance firms that have the cover platforms include CIC, Madison, Jubilee, and APA.
The Shippers Council of East Africa has tasked insurance firms to install a 24-hour automated system interlinked to government clearing systems to facilitate the cover uptake.