Regulatory gaps denying local insurers marine business- experts

Failure to fully implement the directive on mandatory cover of imports by local underwriters is to blame for the low uptake of marine cargo insurance in Kenya, industry players now say.

This, as foreign firms continue to reap big from the segment denying Kenyan insurance firms the lucrative business in the industry, seven years since the directive to localise underwriting of imports into the country, effected in January 2017.

Kenyan underwriters had hoped to benefit from the marine business estimated to be worth over Sh30 billion in premiums.

Kenya Revenue Authority was at the commencement of the directive tasked with the implementation in collaboration with relevant stakeholders, to ensure that all imports are locally insured.

However, there has been gaps in the implementation of the Marine Insurance Act, industry players now say, as both KRA and the Insurance Regulatory Authority remain non-committal.

Under the Act, a person with insurable interest in marine cargo shall place marine cargo insurance with an insurer registered under the Insurance Act (Cap. 487) unless prior exemption has been granted by the Commissioner.

“The main challenge is about enforcement, KRA is not enforcing saying it is the mandate of the Insurance Regulatory Authority, and IRA has no role to play at the port,” said Alfred Musungu, and industry expert and Oceanic Marine CEO.

There has also been undercutting in the industry as insurance firms seek to outdo each other in the marine business some companies setting premiums at as low as 0.05 per cent of the value of goods, increasing the number of transactions and the burden of claims.

This prompted some underwriters to call on the regulator (IRA) to step in and set the premiums at either 0.5 per cent or 0.75 per cent of the value of goods, as a way of creating an even playing ground.

IRA only provided insurance companies with a guiding rate that largely borrowed from rates charged by foreign underwriters.

Latest data by IRA shows underwriters recorded Sh4.4 billion in gross premium income from marine insurance for the fourth quarter of 2023, up from Sh4.1 billion.

This, as claims dropped to Sh661.7 million from Sh807.2 million in a similar quarter in 2022.

Meanwhile, the concern over local insurance firms’ capacity to underwrite the complex marine business, considering their financial and technical capacity, also remains a challenge even as underwriters dismiss what they term “fear” by importers mainly manufacturers.

Foreign firms are still taking the lion share of underwriting business.

"Some importers have been getting favourable rates from these firms compared to Kenya but this has changed. The local insurance industry has the capacity to insure them and offer them the same rates if not better terms,  so it is about educating them and partnerships as opposed to selling,” said James Mbithi, acting CEO and principal officer at Britam General Insurance.

According to industry players, the local insurance sector has the capacity to insurer up to 60 per cent of the country’s total imports, valued at Sh1.6 trillion last year-Economic Survey 2024.

The two spoke in Nairobi on Friday during Britam’s Marine Insurance Masterclass to explore digital innovations in driving the region’s maritime trade.

The theme, “Marine Insurance in a Digital World,” explored the latest trends and innovations shaping the future of marine insurance.

 “Our digital marine insurance portal is a transformative platform enabling clients to navigate

complex shipping risks conveniently. This innovation positions us as the go-to partner for businesses navigating Kenya’s growing import-export market,” said Tom Gitogo, Britam’s Group managing director and CEO.

Britam handled over Sh600 million in marine premiums in 2023, cementing its position as the largest marine underwriter in Kenya.