Industry insiders fault new marine insurance law

Cargo awaits clearance at Mombasa Port. New law requires imports to be insured locally. [Gideon Maundu, Standard] The government's renewed push to enforce mandatory local Marine Cargo Insurance (MCI) for imports has sparked controversy among industry stakeholders, who argue that poor coordination among regulatory agencies may lead to another failed implementation like it happened in 2017. The directive, announced jointly by the Kenya Revenue Authority (KRA) and the Insurance Regulatory Authority (IRA), affirms that effective February 14, 2025, all importers must procure MCI from locally licensed insurers before customs clearance. However, importers, clearing agents, and insurance brokers have strongly opposed this move, citing concerns over conflicts with international trade agreements, potential monopolisation and a lack of stakeholder consultation. Industry experts warn that making local MCI mandatory conflicts with international commercial terms (Incoterms) and the East African Community Customs Management Act (EACCMA). The Shippers Council of East Africa (SCEA) argues that enforcing local MCI undermines the importer's right to choose their coverage provider and contradicts existing trade practices. "We hope the Commissioner of Insurance will provide clear guidance and reinforce the provisions allowing for exemptions from mandatory local insurance," said SCEA CEO, Agayo Ogambi. Additionally, the Kenya International Freight and Warehousing Association (KIFWA) highlights that international trade often involves contracts where insurance is bundled under Cost, Insurance, and Freight (CIF) or Carriage and Insurance Paid To (CIP) terms. KIFWA suggests that local MCI should apply only to shipments under Free on Board (FOB) or similar terms, where insurance is not inherently included. Criticism has also emerged regarding the lack of industry engagement before the directive's rollout. The Association of Insurance Brokers of Kenya (AIBK) and the Association of Kenya Insurance Professional Agencies (AKIPEA) expressed disappointment at being excluded from discussions. AIBK Chairman Anthony Mwangi stated, "We were never engaged, and the recent directive was not even shared with us. The involvement of the IRA in insurance procurement raises concerns over conflict of interest, given its regulatory role." The Insurance Act mandates that "Kenyan business" must be insured locally unless specific exemptions apply. In 2017, the Treasury enforced this provision, leading to a sharp increase in MCI uptake. Premium collections surged by 36 percent from Sh2.5 billion in 2016 to Sh3.4 billion in 2017, followed by another increase to Sh3.3 billion in 2018. However, uptake declined due to a lack of enforcement and delayed integration among industry stakeholders. To create a framework to procure insurance locally and make it a requirement for clearing imported goods, KenTrade, which has been operating the National Single Window System where all agencies involved in clearing goods interact for over a decade, has already onboarded all the MCI underwriters. Strangely, the IRA and KRA initiative has not factored this initiative in the fresh bid. "We have requested KRA to finalise the part to integrate with the RECTS MCI module with iCMS. However, applications approved by underwriters are visible to KRA using the Unique Consignment Reference (UCR) link, which we share with KRA when an IDF is approved," KenTrade Chief Executive Officer David Ngarama said. Safaricom, Kenya's leading telecommunications company, is supposed to facilitate the procurement of digital Marine Cargo Insurance (MCI) certificates for importers. In collaboration with the IRA and KRA, Safaricom has integrated the Coral Marine Cargo Insurance Mini App into its M-Pesa Super App, enabling importers to obtain MCI certificates. The process begins with importers obtaining an active Import Declaration Form (IDF). They can then access the Coral Mini App via the M-Pesa Super App to retrieve or input their IDF number, which auto-populates necessary cargo details. After completing the required information and paying the premiums, the system generates a digital MCI certificate. This certificate is electronically submitted to the IRA platform and forwarded to KRA's Integrated Customs Management System (ICMS). However, industry players are concerned about how the application will assist in seeking claims since the mobile service provider does not have experience processing claims. Also, the IRA is the industry regulator, which could result in a conflict of interest. Beyond industry opposition, the new system raises practical concerns. KIFWA questions how the MCI will apply to Import Declaration Forms (IDFs) that are cancelled before entry submission. Similarly, uncertainty surrounds exemptions for shipments under government-to-government projects, humanitarian relief efforts, and credit-based imports where suppliers retain insurable interest. Further complicating matters, Ogambi stressed that global insurance policies often cover such shipments and a blanket requirement for local insurance could result in double insurance costs for importers. "We hope the Commissioner of Insurance will provide clear guidance on exemptions, particularly for shipments already insured globally," he said. The mandatory MCI initiative was initially introduced through the Finance Act of 2017, requiring all cargo with insurable interest to be covered by local insurers. While this led to a temporary surge in premium collections-from Sh2.5 billion in 2016 to Sh3.4 billion in 2017-compliance later dwindled due to enforcement lapses and lack of industry coordination. Despite government efforts, local marine insurance remains underdeveloped. Many importers prefer insuring their cargo abroad due to perceived inefficiencies in local insurance firms, higher costs, and bureaucratic claim processes. Traders dealing in perishable goods, in particular, find local policy structures too rigid for their needs. As discussions continue, stakeholders are urging the government to reconsider a more market-driven approach rather than mandatory enforcement. KIFWA argues that making local insurance attractive through competitive pricing, efficient claims processing, and enhanced service delivery would naturally boost uptake without coercion. "The insurance should be optional rather than mandatory. Instead of enforcement, the government should create an enabling environment that makes local insurance more attractive," said Roy Mwanthi, KIFWA national chairman. Mwanthi said that the IRA did not carry out any public participation, hence why the industry stakeholders are opposing the directive. "The proposed rates are too high considering the volumes of the cargo that is imported into the country. Public participation would have agreed on a fair rate that would benefit all the industry stakeholders rather than enriching a few insurance firms," Mwanthi said. With critical concerns yet to be addressed, the fate of the mandatory local MCI directive remains uncertain. The success of this initiative will likely depend on whether regulatory agencies heed stakeholder concerns and adopt a collaborative approach to its implementation.

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