Uptake of new maritime law in Kenya off to slow start

Uptake of the new maritime insurance law compelling importers to buy policies from local underwriters has been slower than expected.

This comes as the Government struggles to come up with modalities to ease its implementation by industry players as well as Kenya Revenue Authority (KRA).

The new law came into effect on January 1.

“As a Government, we have asked KRA to work with stakeholders in the insurance industry for everybody to start feeling the effects of the law. It is not an easy thing, but I am sure in the short run, proper modalities to implement the law will be put in place,” said Maritime and Shipping Affairs Principal Secretary Nancy Karigithu.

Ms Karigithu spoke yesterday during the signing of an agreement between Kenya and Denmark that will see local players in the maritime and shipping sector get advanced training from Denmark for a period of five years.

Insurance firms are eyeing Sh17 billion in revenue in the wake of the new marine law.

DEMONSTRATED CAPACITY

Industry estimates show the new requirement will push marine cargo insurance premiums handled by Kenyan underwriters from Sh2.9 billion in 2015 to over Sh20 billion going forward.

About 90 per cent of cargo import insurance is currently handled by foreign firms, with importers usually paying premiums as part of a package (cost, insurance and freight) to the exporter who handles the underwriting.

Data from the Kenya National Bureau of Statistics shows Kenya imported goods worth $15.7 billion (Sh1.6 trillion) in 2015, 90 per cent of which were insured offshore. The PS said local insurance companies have demonstrated the capacity to cover the huge risks associated with the maritime business.

“Our local underwriters have shown a lot of willingness to take up the risks. This is a good thing for the industry. This law is not all about premiums. It is also about exposing industry players to more challenging risk management models, which is a good thing for the industry to grow,” she said.

Kenya Re-Insurance Corporation (Kenya-Re) Chief Executive Officer Jadiah Mwarania said the re-insurance business is yet to feel the effects of the law.

“You know this is the time that insurance companies renew their policies with us. We expected to get more business. We are, however, still hopeful that as time progresses, the figures will grow as business improves,” he said.