Kenya is among four countries in the region that have resolved to hasten the domestication of Marine Cargo Insurance (MCI) and increase its uptake.
The Marine Cargo Insurance Policy, which Kenya passed in 2016, allows importers and exporters to insure their goods locally instead of using foreign insurers.
In a three-day meeting organised by the Intergovernmental Standing Committee on Shipping (Iscos) in Mombasa, delegates said once the policy is adopted in the respective countries, it will end expatriation of millions of dollars in marine cargo insurance premiums.
Kenya, Uganda, Tanzania and Zambia are members of Iscos, an organisation formed in 1967 to take care of regional common shipping, maritime and logistics Interests.
The MCI policy debate formed part of the resolutions during the 3rd meeting of the technical committee on shipping, maritime affairs and trade facilitation that ended last week in Mombasa.
Kenya and Tanzania already have a MCI law while Uganda and Zambia are yet to enact one.
Uganda Shippers Council (USC) Chief Executive Officer Alex Mbonye said the organisation is working closely with Iscos and Uganda Insurers Association to domesticate marine insurance.
“The Insurance Regulatory Authority has set up an implementation committee including USC, Ministry of Finance and URA plus others, which will meet next Tuesday,” Mr Mbonye said.
He said marine and aviation gross written premium income in 2017 was Sh900 billion in the country, while insurance penetration and insurance density stagnated at 0.81 per cent against the African average of 2.96 per cent.
Iscos director of shipping, ports and freight services Clement Kamendu said a research done by the organisation showed that 90 per cent of regional marine cargo insurance is procured abroad through importing on Cost Insurance & Freight (CIF) and exporting on Free on Board, (FOB) resulting in the expatriation of millions of dollars in insurance premiums.
“Tanzania is already far head in this project. A single portal, which is cloud-based, web and mobile-enabled, is already established for use by importers, underwriters, intermediaries, regulators, relevant authorities,” said Mr Kamendu.
“The portal is named TIIP (Tanzania Insurance Import Portal), so as to accommodate imports by all modes of transport as mentioned by amended insurance law.” He said Uganda finance minister, Matia Kasaija directed insurance industry regulator to ensure all companies importing goods into Uganda procure marine cargo insurance locally with effect from July 2017, but was not implemented.
“As we meet here today, a taskforce revived in March 2019 is in place spearheading the implementation and we expect the effective date of the implementation soon,” he added.
Mr Kamendu said in 2017, Zambian minister for finance Felix Mutati directed amendment of the country’s Insurance Act tp make it mandatory for citizens to secure MCI locally.
“The amended Bill was to be promulgated in the first quarter of 2018 and MCI Task Force was established in 2017 during Iscos Incoterms and International Trade Workshop in Zambia,” he said.
“An inaugural meeting held in January 2018 agreed to develop regulation which is still in the process,.
During the Mombasa meeting, shipping players were asked to adhere to the new policies in their countries and have all their cargo insured locally instead of insuring them with foreign insurance agencies.
“Laws in each of the member states require all marine insurance business to be placed with local insurance companies. However, this was not the practice by the majority of shippers who import goods on Cost, Insurance and Freight (CIF), and export on Free on Board (FOB) basis,” Mr Kamendu said. The practice of placing MCI with foreign insurance firms, he said was making member states to lose over Sh100 billion annually in insurance premiums.
“As a result, Iscos should continue sharing information on best practiced on the implementation methods of MCI, continue to monitor and ensure the Insurance Laws are enforced in all member countries,” he said.
Mr Kamednu also asked member states to digitise MCI platforms.
“Iscos should help in sharing information on the need for the digitisation of MCI platforms as has been done in Tanzania,” he said.
Iscos chairman Aron Kisaka said the purpose of the meeting was to “identify, consider, deliberate and review industry issues” affecting the region as a whole.
“We are happy that some of the achievement was the agreement that this platform would help in guiding the region on modalities of interfacing with international service providers in the shipping, maritime transport and trade facilitation industry,” he said.
Mr Kisaka is the Director of Transport Services, Ministry of Works, Transport and Communication in Tanzania. Iscos acting secretary-general Kassim Mpaata said despite the presence of trade facilitation initiatives at various levels in the region, the shipping and logistics sectors continue to face enormous challenges and impediments to trade.
“There is need to put these resolutions into use especially on the importance of collaboration between industry players if the region was to realize seamless flow of trade, seamless connectivity, efficiency and competitive costs in doing business,” Mr Mpaata said.