Hurdles hampering local imports insurance uptake

When the law that made it mandatory for imports to be insured locally came into being in 2017, insurers expected to reap big as the new business segment was estimated to be worth about Sh20 billion.

However, one year down the road, their hopes have been dashed. A raft of factors are to blame for this adverse turn of events, key of which are laxity in the implementation of the law and lack of awareness as well as clear policy guidelines on the benefits of insuring imports locally.

The Kenya International Freight and Warehousing Association (Kifwa) chairman William Ojonyo said many importers are yet to understand the benefits of using local insurance firms for their cargo.

“There is a very slow sensitisation in terms of the benefits importers would get locally,” he said.

Mr Ojonyo said Kifwa will spearhead an awareness campaign in partnership with the concerned government agencies.

“It is one of the best options we have in the wake of the challenges of delayed evacuation of cargo, which comes with delayed payments to shipping lines. So if consignments are FOB (Free on Board Shipping Point), then clearly we shall have a strong negotiating power with the shipping companies on detention and delays that may arise,” he said.

He said Kifwa plans to meet the Kenya Association of Manufactures (KAM) to discuss the matter.

Speaking during the 13th Annual AIBK regional conference at Sarova Whitesands, the Association of Insurance Brokers of Kenya (AIBK) chairman Nelson Omollo said there is still a low uptake of the local marine insurance retention policy.

“When the Treasury Cabinet Secretary Henry Rotich directed in 2017 that the marine cargo be mandatory insured locally, we expected that there would be a growth of about Sh20 billion in the sector. But this did not take place since the law was not fully implemented. In some instances, even the clearing agents and other players collude to help the importers avoid that rule,” Mr Ojonyo said.

Dennis Nyongesa, a board member at AIBK, said the uptake of the local marine cargo insurance is still facing a lot of challenges, but added that this could change in the near future.

“The regulator is currently looking at the issue and we expect soon to have clear guidelines over its implementation,” said Mr Nyongesa.

Two weeks ago, The Intergovernmental Standing Committee on Shipping (Iscos) asked its member countries to push harder for the adoption of local marine cargo insurance.

The Iscos acting secretary general Kassim Mpaata said during the end of the 5th meeting of the Iscos Assembly of ministers at Flamingo hotel in Mombasa that insuring cargo locally would inject more than $800million (Sh80 billion) annually in the economies of the member states.

“It is gratifying to note that member states of Kenya and Tanzania have already implemented our advisory on the same while Uganda and Zambia are in the advanced state of implementing it,” Mr Mpaata said.

Many importers, he said, go on the internet and choose ‘Cost, Insurance, and Freight’ (CIF), which means the importer is sending money to buy the goods, pay the money for the freight shipping companies plus for the foreign insurance.

Maritime and Shipping Affairs PS Nancy Karigithu said the government sought to address the issue several years ago.

“The marine cargo insurance retention is an initiative that we took on behalf of the government. We have worked with Iscos in order to sensitise, not just the shippers themselves, but the relevant government agencies. It is high time we stopped the flights of foreign exchange from countries to our partner trade nations,” she said.

Mrs Karigithu said local importers are not well-versed with international trade, exposing them to “strange and challenging” commercial shipping terms.

“When importing goods, the component of insurance is also loaded on the price. But even while doing that, we are dealing with partners we don’t know, an insurance company we don’t know,” she said, adding that the reason the government adopted the local marine cargo insurance retention system was to address these issues.

“We wanted to empower our people to influence the terms under which they trade with their foreign counterparts. But most importantly to stop the flights of capital and foreign exchange,” she added.

“If something happens to your goods and you have insured with a Kenyan company, the insurer will be easily accessible to you, and you will also be able to talk to them in a language you can understand.”

Tanzania High Commissioner to Kenya Pindi Chana, who represented Tanzania Minister for Works Isack Kamwele at the assembly, said her country is adopting the local marine cargo insurance domestication campaign initiated by Iscos.

“While Kenya is in the second year of implementation, Tanzania started enforcing the revised marine insurance law on 1, January this year with a close guidance from Iscos as it did to make it a reality in Kenya,” said Dr Chana

“In Tanzania, Iscos also guided in putting in place a platform for securing marine insurance online, namely the Tanzania Import Insurance Platform. I understand that Zambia and Uganda are also working hard to ensure that appropriate law on marine cargo insurance are implemented.”