A team will be formed to help Kenyan shippers swiftly buy local marine insurance as the January 1, 2017 deadline fast approaches.
State Department of Shipping and Maritime affairs Principal Secretary Nancy Karigithu said the committee including insurers, state agencies and shippers will smooth out any hitches to implementation of the order issued by the Treasury.
She maintained the government will enforce the law in a fortnight.
“The taskforce will establish why many importers and exporters prefer to procure insurance covers overseas. It will also develop a joint action plan of all concerned parties for awareness campaigns on appropriate use of international commercial trade terms across the country,” said Mrs Karigithu.
She was speaking in Nairobi during a forum organised by the Shippers Council of Eastern Africa in collaboration with Britam Holdings to educate importers on the upcoming implementation of Section 20 of the Insurance Act Cap 487 and the readiness of the local underwriters to cover imports.
The law prohibits placement of marine insurance in the hands of foreigners except in exceptional circumstances.
Insurance companies in the general business have been aggressively positioning themselves to take advantage of the opportunity that is expected to boost their premiums by about Sh17 billion.
About 90 per cent of cargo import insurance is currently handled by foreign firms, with importers paying the premiums as part of a package (cost, insurance and freight (CIF) to exporters who handle the underwriting.
Importers through Shippers Council chief executive Gilbert Langat said as the law’s implementation looms, the industry must demonstrate both financial and technical capacity to undertake marine insurance locally.
“Another major concern for shippers is price competitiveness of the products that are locally available,” said Mr Langat.
“Claims settlement and service level agreement must be clearly stipulated while procuring local marine insurance. The test for insurers will be in the time it takes to settle claims and ensuring that the importer incurs very minimal cost in the process.”
However, Britam Holdings Group managing director Benson Wairegi said the local industry has the capacity to competitively offer marine cargo insurance for the importers.
The average cost of marine insurance is estimated at about 0.5 per cent of the value of imported goods.
The Kenya Revenue Authority (KRA) deputy commissioner of Customs Charlie Onduso said the taxman is eyeing the new business to help it grow revenues given that insurance companies pay a duty equivalent to 0.05 per cent of the insured consignment’s value.
Statistics show Kenya imports goods worth Sh1.57 trillion annually, majority of it insured with offshore providers. The imports are expected to hit between Sh2 trillion and Sh2.2 trillion by 2020, yielding potential marine cargo insurance spend of over Sh30 billion annually in premiums.
Some 36 Kenyan insurers are angling for the new business with a good number aggressively pitching the business to importers.
Foreign affiliated insurers, especially subsidiaries of South African conglomerates, have been touting the parent companies muscle and experience in the business pitches.