Local firms collected Sh987 million between January and March compared to Sh827 million over the same period last year
The Kenya Revenue Authority (KRA) started implementing Section 20 (1) of the Insurance Act that requires all insurance cover for imports should be procured locally on January.
Implementation of the MCI law shifts the insurance element to the local insurer with the importer advised to import on Cost and Freight (CFR) only.
Marine cargo insurance premiums have jumped 19.4 per cent in the first quarter of the year as more importers ditch their long term contracts with foreign firms.
Local firms collected Sh987 million between January and March compared to Sh827 million over the same period last year. In January, Kenya began to implement a law which compels importers to buy the MCI policy from local firms.
According to the Insurance Regulatory Authority (IRA) data, most of the premiums were paid to three leading MCI cover underwriters - Britam General, Kenindia Assurance and GA Insurance – of the 37 firms so far licensed to provide the cover.
The IRA would not project how much the industry is likely to collect in the remaining months of the year citing fluctuation of imports but maintiained there were prospects of growth in the sub-sector.\
“The data may not at the moment give a reliable projection but of importance is that there is a cumulative growth of premiums written in 2017 compared to 2016,” said IRA acting chief executive officer Godfrey Kiptum.
The Kenya Revenue Authority (KRA) started implementing Section 20 (1) of the Insurance Act that requires all insurance cover for imports should be procured locally on January 1, opening a windfall for local underwriters to more than Sh20 billion annual premiums paid to foreign firms.
When most importers order goods, they ship the cargo on a Cost Insurance and Freight (CIF) basis, leading to capital flight of billions of shillings paid to foreign firms in form of insurance premiums.
Implementation of the MCI law shifts the insurance element to the local insurer with the importer advised to import on Cost and Freight (CFR) only.
Industry players have, however, downplayed the projected growth, saying if the industry was expected to reap, underwriters should have collected more than Sh3 billion in the three months.
But Mr Kiptum said the industry regulator does not view response as being slow, noting that the figures may be attributed to business cycles and they expect the numbers to rise in the coming months.
“Some of the challenges we faced in implementing the law was fear by importers and perception issues towards local insurers. But in conjunction with Kenya Revenue Authority and Kenya Trade Network Agency (Kentrade) we have conducted several sensitisation workshops for marine cargo stakeholders,” said Mr Kiptum in an e-mail interview.
“The response has been positive. We have assured the importers and their agents that the industry has the capacity to handle MCI and there is good support from them,” he added.
Speaking at the Resolution Insurance Mombasa annual awards ceremony at the Sarova Whitesands Beach Resort last week, group chief executive officer Peter Nduati said MCI presents potential in the market due to its mandatory implementation.
“Due to the proximity of the port, shippers & clearing agents in the region, the county’s income basket will continue to grow as more insurance providers tap into the
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