James Wambugu – UAP Insurance managing director
Uptake of marine cargo insurance has got off to a slow start even as firms insist that it does not apply to cargo transactions initiated last year.
UAP-Old Mutual Insurance said yesterday underwritten premiums have jumped three times in the first two months of the year against the anticipated five times.
Group General Insurance Managing Director James Wambugu said marine Insurance cover rose from Sh12 million to Sh32 million in January and February.
“We have been aggregating the numbers with Association of Kenyan Insurers (AKI) and a couple of companies have seen growth although the numbers do not seem to reflect total premiums anticipated,” said Mr Wambugu during an investor briefing in Nairobi.
“The law was only covering imports from January any business that had been concluded before the end of last year was still insured overseas.”
Section 20 of the insurance law that makes it mandatory to insure marine cargo locally came into effect in January.
The new law was expected to boost underwritten premiums to over Sh20 billion for the year.
There has, however, been infighting between shippers and insurers as to whether local firms have the capacity to underwrite the business.
Shippers were pushing for staggered implementation of the policy on smaller cargo before graduating to bulk cargo such as petroleum and grain.
AKI insists its members already insure some containerised cargo save for edible oil, petroleum and bulk grain.
Insurers say the directive is being fought by multinationals who want to repatriate all their profits abroad since they have established insurers back home who do not want to lose the yearly returns in their books.
Old Mutual has already written Sh3 billion worth of premiums since January even as it saw a drop in after tax profits for the year to December last year.
The company’s profit stood at Sh825 million, a 7.9 per cent drop from 896 million posted in 2015 after it paid off deferred tax that boosted earnings.
The management said income was impacted by a Sh101 million loss due to a bear run on equity holdings at the Nairobi Securities Exchange (NSE) and the fall of the South Sudan pound.
“The devaluation of the South Sudan pound and the down turn at the Nairobi Securities Exchange, which led to unrealised losses on equities, were the key contributing factors to the decline in comprehensive income,” said Group Chief Executive Peter Mwangi.
Mr Mwangi said the firm would go slow on real estate and equities market to reduce exposures until after the August elections.
The financial services group owns UAP Equatorial Towers in South Sudan, Nakawa Business Park in Uganda and has a stake in Kenya’s Two Rivers Mall.