Marine insurance coming, but are we all ready for it?

The implementation of marine cargo insurance collection locally as directed by the line ministry from January 2017 is noble and requires both goodwill and backing by industry players.

We must as a team agree that collecting premiums locally will boost the economy, especially now that this will be a new stream of revenue collection that will go a long way in improving income and eventually ensure better living standards.

The fact that the premiums have initially benefitted the supply countries is not good music to a country that needs revenue now more than ever given the dynamics of trade and logistics in the recent past.

It is estimated that Sh20 billion is exported to the supply countries in this regard, a figure that if real and is pumped into our economy, can make a great impact in raising living standards.

My concern is drawn from the process of implementation which, in my view, may be our undoing; especially those tasked with the implementation of collection.

Clearing agents and importers who are the paymasters of the premium have been conspicuously left out in the process of planning and implementation.

To date, not a single workshop bringing together importers and their agents has been put in place, yet the process of collecting locally is about to begin.

Worse still, no provider has found it wise to explain the new phenomenon and the nature of the product to the user, in other words, we do not know the amount and the scope of cover for planning purpose.

The public who apart from having a right to information and are the potential customers, are least aware of the requirement to purchase insurance locally for all imported cargo yet out there, service providers and underwriters are positioning themselves to reap from the Sh20 billion windfall. Whereas every player in the insurance industry capable or otherwise is angling for this new requirement to collect, very few seem to consider that the user has been left out of the implementation.

I stand to be corrected, but clearly, the motivation behind all the jostling both in the private sector and the Government seems to be about the money at stake.

We must appreciate human nature to resist perceived forced change especially where there is a window to invoke the law.

World Trade Organisation Incoterms, which pays and assumes the risk and liability between the seller and buyer, gives exclusive rights to the two parties to decide on who of the two parties assumes risk and liability.

For example, the Incoterms-EXW means that goods are available to the importer from the place of production, thus the seller or supplier gives the quote of goods not including shipping, loading, insurance or any other cost likely to apply.

You realise, therefore, that the liability of all the above is on the importer after production and availability at the suppliers warehouse.

The question is, are we sensitising the importers on this terms before rushing to give deadlines?

The other extreme Incoterms is purchasing goods CIF, meaning everything is done by the supplier and the importer only waits for goods at the port of discharge which in this case would be Mombasa.

In this scenario, the terms of trade will mean that the suppliers quotes for goods delivered in Mombasa including insurance.

It is on this premise that I believe we may not have to push the implementation date forward but we must consider a gradual implementation as we fully engage importers and clearing agents.