Regulatory challenges hit marine insurance uptake

Legal and regulatory challenges are delaying full implementation of the directive to insure marine cargo locally, making it difficult for the industry to meet its target.

The unveiling of Kenya Orient marine insurance cover for freight, logistics and shipping agents in Mombasa last year. FILE PHOTO | NMG 

IN SUMMARY

  • The Association of Kenya Insurers (AKI) says the industry is facing bottlenecks in the enforcement of the directive to have marine cargo insured locally making it impossible to realise a target of annual premium of Sh20 billion.
  • Latest industry data from AKI released last week in Nairobi shows that in 2017, gross written premium for the class stood at Sh3.74 billion.
  • This was however a growth of 41.54 per cent from Sh2.64 billion recorded in 2016.

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Legal and regulatory challenges are delaying full implementation of the directive to insure marine cargo locally, making it difficult for the industry to meet its target.

The Association of Kenya Insurers (AKI) says the industry is facing bottlenecks in the enforcement of the directive to have marine cargo insured locally making it impossible to realise a target of annual premium of Sh20 billion.

Latest industry data from AKI released last week in Nairobi shows that in 2017, gross written premium for the class stood at Sh3.74 billion.

This was however a growth of 41.54 per cent from Sh2.64 billion recorded in 2016.

“Given the import volumes into the country, the premium remains much lower than what the industry anticipated,” said AKI executive director Tom Gichuhi in an interview.

“AKI, Insurance Regulatory Authority (IRA), Kenya Revenue Authority (KRA) and the Intergovernmental Standing Committee on Shipping (ISCOS) are in constant consultation to see how best to implement the directive.”

Mr Gichuhi said once fully implemented, the industry should see marine cargo premium improve significantly. The Marine Insurance Act Cap 390 makes it compulsory to insure marine cargo locally.

READ: Marine insurance business sparks price war as firms jostle for clients

According to the industry regulator, the wordings of section 16A of the Act require persons with insurable interest in marine cargo to place insurance with underwriters registered under the Act unless prior approval is granted by commissioner.

“The problem with the wordings of the section relates to lack of definition of the word “commissioner” and the fact that insurers are not registered under the Marine Insurance Act Cap 390,” said IRA acting chief executive Godfrey Kiptum.

Mr Kiptum said the gaps were addressed in Finance Bill 2018 by clarifying that the commissioner of insurance is the commissioner as defined under section 2(1) of the Insurance Act.

The bill also clarified that persons should place insurance cover with firms registered under the Insurance Act. This amendment is pending approval by the National Assembly. The effective date for implementation of amendment is January 1, 2019.

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