Kenya is introducing a significant shift in its marine cargo insurance landscape: all imports into the country must now be insured by local companies. This directive, announced by the Kenya Revenue Authority (KRA) and the Insurance Regulatory Authority (IRA), aims to strengthen the local insurance industry, boost revenue, and ensure greater coverage for imported goods. However, the move has sparked debate, raising concerns about its impact on importers, insurers, and international trade.
New Requirements Under the Directive
Effective February 14, 2025, the directive requires all importers to secure local marine cargo insurance to clear customs. This mandate stems from changes introduced in the Finance Act of 2017, which amended the Marine Insurance Act. Specifically, Section 16A now mandates that anyone with an interest in marine cargo must obtain insurance from a locally licensed insurer. Furthermore, Section 20 (4) prohibits the use of insurance providers not registered under Kenya’s Insurance Act.
To comply with the new regulation, importers will need to obtain a digital Marine Cargo Insurance certificate through platforms like clearing agents, importer apps, and dedicated portals. These systems will link directly with the IRA’s electronic platform for verification, enabling the automatic submission of insurance details to KRA’s Integrated Customs Management System (ICMS), which will facilitate the customs clearance process.
A Potential Game Changer: Local Insurance Growth
Supporters of the directive argue that it could transform Kenya’s economic landscape by expanding the local insurance industry. By mandating the use of local insurers, Kenya is positioning itself to retain more premium income and encourage the growth of the insurance market. This move could help strengthen the local sector and foster collaborations with international reinsurers, enhancing Kenya’s capacity to underwrite complex risks.
Additionally, the directive has the potential to boost both local and foreign investment in the insurance industry. This influx of investment would contribute to the development of specialized knowledge, capacity building, and the creation of a more competitive, resilient sector.
Emerging Challenges: Trade Barriers and Concerns
Despite the potential advantages, concerns have been raised about the directive’s impact on international trade. A key issue involves the Cost, Insurance, and Freight (CIF) arrangements, in which sellers are traditionally responsible for securing insurance up to the buyer’s port. Under the new directive, sellers will no longer have the autonomy to choose their insurer, which could disrupt contract negotiations and introduce delays. Sellers will now have to navigate a new insurance market, ensuring that local insurers meet their coverage and reliability requirements.
In Free on Board (FOB) arrangements, where buyers are typically responsible for insurance once goods are loaded onto a vessel, the directive similarly limits flexibility. Buyers will no longer have the freedom to select their insurer, thereby restricting their ability to shop for competitive pricing and innovative coverage solutions.
Another significant concern is the potential for legal complications regarding pre-existing agreements with international insurers. The new requirement could create conflicts with existing policies, leading to legal hurdles as businesses attempt to comply with the local insurance mandate.
Moreover, some industry players question whether local insurers have the financial capacity or expertise to handle large-scale, high-value cargo policies. This concern is heightened by global challenges, such as geopolitical tensions in the Red Sea and rising piracy threats, which are driving up shipping and insurance costs. These external factors raise doubts about whether Kenya’s local insurers are equipped to meet the demand for comprehensive marine cargo coverage.
Looking Ahead: A New Era or a Trade Hindrance?
As Kenya’s new insurance directive comes into effect, the industry faces a critical juncture. Will this initiative lead to a more robust and competitive local insurance market, or will it create new barriers to international trade? The coming months will reveal whether the directive succeeds in empowering the local industry or hinders Kenya’s participation in global trade.
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