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Thriving local marine insurance business good for the economy

In his June budget speech, Treasury Cabinet Secretary Henry rotich invoked a previ- ously neglected provision of the Insurance Act that makes it manda tory for imported goods to be locally insured. With  a  stroke  of  the  pen, the CS saved the country billions of shillings repatriated to foreign coun- tries as marine insurance premiums thus  denying  our  economy  and  the insurance industry valuable revenue. Subsequently,   Kenya   revenue Authority  (KrA)  was  tasked  with enforcing   the   directive.   Although discussions   between   the   govern- ment  and  various  stakeholders  are still   ongoing,   full   implementation is  expected  to  kick  off  by  January 2017. Importers  will  be  required  to show  a  certificate  of  local  marine insurance   for   their   goods   to   be inspected and cleared by KrA at the point of entry.

The  move  by  the government opens huge opportunities for local insurers to tap into this lucrative business. It also makes it easier for local importers to insure goods in transit while streamlining the claims and settlement process which will now be done locally.

essentially, marine or maritime insurance involves providing finan- cial protection against loss or dam- age to a ship or cargo in transit over sea, land and air. In an increasingly complex global trade value chain, marine insurance plays a vital role in mitigating financial risks linked to loss or damage to cargo while in transit.

marine insurance business in Kenya is currently estimated at Ksh20 billion but only  accounts for a fraction of the country’s total gross written premium at Ksh146 billion last year according to the Association of Kenya Insurers.

With increased investment in infrastructure coupled with Kenya’s rising status as a regional busi- ness hub, the value and volume of imports has risen significantly in recent years. marine   insurance   uptake  in Kenya has been low with high pre- miums and the fact that goods are

normally insured in the country of origin cited as key factors. Yet the scope of cover offered by overseas underwriters typically ends at the destination port thus exposing cargo damage or loss through theft, pilfer- age and accidents in transit to the warehouse.

 

Missing link

Local insurers have the capacity to bridge this “missing link” as they have a good grasp of domestic risks. Contrary to claims reported in the media that they lack financial and technical capacity to offer marine insurance, Kenyan insurance firms have been offering both marine hull and marine cargo policies to local and multinational goods importers. There is adequate local expertise to handle marine insurance business to international standards.

 

Innovation

However, a lot of innovation is need- ed to boost marine insurance uptake in Kenya. This calls for innovative delivery channels that make it eas- ier for the insured to access such policies. A case in point is an online portal unveiled this week by Kenya orient Insurance that enables clients to sign up for marine insurance cover from wherever they are.  In a globalized business environment, technology will play a vital role in shaping distribution channels. This is already happening in the insur- ance industry as attested by various mobile and online applications for various  products.

Innovation will thus enable local insurers offer internationally com- petitive marine insurance covers. This will not only spur Kenya’s trade with the rest of the world but also provide impetus for the insur- ance industry and the economy to thrive.