ICEA Lion, one of the leading Marine Cargo Insurance (MCI) underwriters has weighed in on the discussion about the status of the government directive issued about two years ago requiring all imports to be insured by local insurance firms. Although the overall performance has significantly improved since the National Treasury directive to enforce Section 20 of the Insurance Act came into effect on 1 January 2017, the premiums remain much lower than what the industry anticipated. Most importers continue to bring in cargo on Cost Insurance and Freight (CIF) basis, meaning insurance has been purchased by the seller from an overseas underwriter; the sector is yet to realize its full potential.
“Failure to enforce the directive has seen importers continue to rely on the sellers abroad to arrange to insure their imports,” said Mr. Mukuria, the Assistant General Manager, Business Development, ICEA LION General Insurance.
“Perhaps one of the biggest reasons for this gap in enforcement is the fact that it is not clear which authority or agency is to administer the directive; was it meant to be Kenya Revenue Authority (KRA) or Insurance Regulatory Authority (IRA)?” Mukuria told Freight Logistics magazine.
However, it is not all gloom. The government should make it compulsory to obtain insurance locally and empower the enforcement agency, clearly stipulate clear, non-compliance penalties as is the case under Motor insurance.
“There is need to bring on board all stakeholders involved in the marine insurance chain, in particular the Central Bank of Kenya – as banks issue Letters of Credit-, Association of Insurance Brokers in Kenya (AIBK), The Association of Kenya Professional Insurance Agents [AKPIA] and the Kenya Association of Manufacturers (KAM) for training of importers and exporters on appropriate terms of trade,” Mukuria added.
As one of the oldest marine insurance underwriters in the country with roots dating back to 1895, ICEA LION continues to do its bit to grow the sector. The company has established sustainable partnerships with leading marine insurance brokers, importers, exporters, logistical companies and transporters; continues to conduct product knowledge training and awareness campaigns. ICEA LION also developed Marine Insurance Portal to enhance the marine insurance uptake and drive growth. These efforts saw ICEA LION General Insurance crowned the winner in the inaugural Marine Cargo Insurance Awards 2017-2018.
Importers who have bought marine insurance from local insurers benefit from the opportunity to personally negotiate and obtain discounted premiums. They also obtain customised and affordable insurance coverage for the variety of cargo, not to mention the fact that the local underwriters would invariably process and pay the ensuing claims faster than the foreign players.
“We understand the local environment better and are able to offer affordable, customised and innovative marine products, marine product knowledge training and appropriate pre-insurance risk surveys with the resultant risk improvement measures and premium savings, Mukuria said.
Mr. Mukuria lauded the new Integrated Customs Management System of KRA and its integration with Single Window System of KenTrade saying it will positively impact marine cargo underwriting. It is expected that once up, the integration will result in faster clearance of goods from the ports and consequently reduced exposure of cargo to marine perils hence reduced damages and losses to insurers.
“In the long run, favourable loss ratios would result in corresponding premium reduction,” quipped Mr. Mukuria.
There is much more to be done to actualise this intention. The directive brought considerable improvement compared to the years before 2017. The gross written premiums were Ksh 2.3 billon compared to Ksh 1.45 billion in 2016, representing an increase of 59%.
The industry is also ready, with a current direct capacity of over Ksh23.3 billion, which has been beefed up through consortium of reinsurance to cater for very huge imports such as consignments of bulk grain and oil.
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