Apart from weak enforcement of the law to domesticate marine insurance, underwriters have also contributed to the problem by opting to front additional risk to foreign players instead of co-insuring with their counterparts in the country.
These practices contravene the changes that were made to the Insurance Act, requiring all marine cargo imports to be locally insured starting January 1, 2017.
Marine insurance covers risks such as total loss of package, explosion of the vessel, piracy, natural perils and incorrect packaging, protecting importers and exporters from loss and giving financiers the comfort to lend to businesses.
Insurance Regulatory Authority (IRA) data shows marine and transit insurance has been growing, with premiums hitting Sh4.41 billion last year, a 5.2 percent growth from Sh4.19 billion in the preceding year and 63.3 percent rise when compared with Sh2.7 billion in 2016 just before the directive.
While the 2017 directive has helped grow premiums from the marine business, insurers say the figures are way below when compared with the value of imports.
Kenya’s value of principal imports hit Sh2.61 trillion last year, a growth of 4.9 percent from Sh2.49 trillion a year earlier and 44.5 percent rise from Sh1.81 trillion five years earlier. These figures convince insurers that they have barely scratched the surface when it comes to marine insurance.
Leonard Chirchir, head of underwriting and reinsurance at Britam General Insurance said in an interview many local insurers have now built capacity for marine insurance by partnering with reinsurers but the low implementation of the 2017 directive continues to deny them business.
“If you look at over the past, like 10 years, insurance companies who used not even to insure marine because of very low capacities, have already put in capital towards building this capacity. For example, companies that used to ensure up to Sh500 million now have a capacity of up to Sh2 billion without requiring a reinsurer,” said Mr Chirchir.
“Enforcement of the law to have marine insurance certificates issued by local insurance companies is the issue. In terms of small and medium-sized importations that come to Kenya or exports to other countries, local insurers can handle it without looking for capacity outside the country. And that is like more than 60 percent of imports that come to Kenya.”
Insurers say they are only seeing a few single imports worth billions of shillings.
Many imports are coming in with insurance from the countries of origin given that the local industry has not done much in educating importers on the implication of such cover. One of the major limitations is usually that such cover excludes any risks beyond the port.
Five insurers accounted for 55.4 percent or Sh2.44 billion of the marine and transit premiums at the end of last year, with Geminia Insurance and Britam General taking top two spots with a market share of 14.49 percent and 13.89 percent respectively.
Geminia insurance, Mayfair Insurance and ICEA Lion General followed with market shares of 11.47 percent, 8.88 percent and 6.63 percent respectively, leaving 27 other insurers in the marine business with 44.6 percent.
“We have to prioritise internal partnering within Kenya before taking business outside. If you combine all the over 30 insurers in marine insurance, each of them has a capacity and this means co-insuring can build a huge capacity for the local industry." said Mr Chirchir.
