Regulator pushed to suspend marine insurance

Navig8 Martinez Vessel with fuel destined for Uganda. Law wants such cargo to be insured locally. [Omondi Onyango, Standard] Key private sector players have jointly submitted a memorandum seeking the suspension of the mandatory requirement for local marine cargo insurance until critical concerns are addressed. The requirement, which took effect on February 14, 2025, has sparked opposition from the private sector, which argues that its implementation should be postponed until stakeholders' concerns are comprehensively addressed. In the memorandum sent to Insurance Regulatory Authority (IRA) by the seven entities say there need for clear exemption guidelines, detailed implementation procedures, and broader stakeholder engagement. The organisations argue that without addressing these concerns, the directive could increase trade costs, reduce Kenya's global competitiveness, and hamper the country's industrialisation agenda. "This request is based on our analysis of the significant impact the directive will have on the private sector if unaddressed, which includes adversely affecting trade, increasing the cost of doing business, and hindering Kenya's industrialisation agenda," reads the memorandum in part. The memorandum was signed by chief executive officers of the Kenya Transporters Association (KTA), Shippers Council of East Africa (SCEA), Kenya Private Sector Alliance (KEPSA), Kenya International Freight and Warehousing Association (KIFWA), Kenya Association of Manufacturers (KAM), Kenya National Chamber of Commerce and Industry (KNCCI), and Kenya Ships Agents Association (KSAA) outlines several pressing issues affecting stakeholders. Section 16A of the Finance Act of 2017 mandates that any party with an insurable interest in marine cargo must secure insurance from a locally registered insurer unless granted an exemption by the commissioner. A primary concern is that global trade practices rely on International Commercial Terms (Incoterms) - the seven sets of rule that define terms of sale between suppliers and importers. In many cases, such as contract manufacturing and credit-based transactions, suppliers retain ownership of the insurance interest until certain conditions are met. The new requirement could complicate these arrangements, introducing legal and financial uncertainties. "International trade is based on globally accepted terms that are negotiated between suppliers and importers," the memorandum further explains. The memorandum also points out a lack of clarity on how the directive will be integrated with the Kenya Revenue Authority's (KRA) Integrated Customs Management System (ICMS) and the KenTrade Single Window System. While Section 16A allows for exemptions, the process for obtaining them remains opaque and largely inaccessible to stakeholders. "We request on behalf of our members the suspension of the implementation of the local Marine Cargo Insurance pending clear exemptions for specific situations such as goods insured under CIF terms, contract manufacturing, and high-value shipments." According to Safaricom, it is supposed to facilitate the procurement of digital Marine Cargo Insurance (MCI) certificates for importers. In collaboration with the Insurance Regulatory Authority (IRA) and KRA, the two agencies that issued the February notice, Safaricom has integrated the Coral Marine Cargo Insurance Mini App into its M-Pesa Super App. This integration enables 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 subsequently forwarded to KRA's Integrated Customs Management System (ICMS). During recent stakeholder engagements in Nairobi and Mombasa, representatives from KIFWA acknowledged the sector's unpreparedness. A joint statement by KIFWA, KEPSA, and the Federation of East African Freight Forwarders Associations (FEAFFA) emphasised the need to defer the rollout, citing unresolved regulatory questions, inadequate awareness, and digital infrastructure limitations. "It is in this regard that we kindly request the deferment of the rollout of this program to allow for more stakeholder engagement and awareness creation among all industry players. We also request a pilot rollout followed by a phased implementation," a letter signed by KIFWA outgoing Chairman Roy Mwanthi and addressed to the Commissioner of Customs and Border Control at KRA, stated. Clifford Ochieng, founder, chairperson, and president of the Association of Kenya Professional Insurance Agents (AKPIA) and the Pan African Insurance Agents Association (PAIAA), noted that the directive, first announced in the 2017 budget, is projected to generate Sh70 billion annually in premiums. However, the lack of full implementation has allowed importers to continue sourcing insurance from foreign underwriters, depriving local insurers of business. "The new directive has not addressed imports without Import Declaration Form (IDF) numbers, which will pose a challenge to importers," the AKPIA Chairperson stated. While stakeholders support the enforcement of the Marine Cargo Insurance (MCI) law, they stress the importance of creating a level playing field. Concerns have been raised about potential monopolisation by a single underwriter, which could stifle competition. The Association of Insurance Brokers of Kenya (AIBK) expressed disappointment at being excluded from discussions, according to its chairman, Anthony Mwangi. Industry estimates suggest that full implementation of the directive could boost the insurance business in premiums annually. However, achieving this potential requires extensive stakeholders' education, structured implementation, and robust digital infrastructure. Stakeholders are now calling on the government to delay the rollout and initiate comprehensive consultations, including pilot trials to test system efficiency and address any loopholes. Without these measures, industry leaders warn that premature implementation could cause more harm than good, jeopardising Kenya's position in global trade.

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