Foreign insurers bag $335m in four years, local firms, govt miss out

The Association of Uganda Insurers said that interested members can offer the cover to help businesses remain afloat after major disasters. PHOTO | FILE 

By HALIMA ABDALLAH, TEA Special Correspondent

In Summary

• According to the Insurance Act 2011, all exporters and importers are required to take out marine insurance with local companies, but the Insurance Regulatory Authority (IRA) and Uganda Revenue Authority have not been aggressive in enforcing this law.
• Insurers in Uganda have engaged the Ministry of Finance, URA and Uganda Shippers Council to persuade importers and exporters to comply with the law.
• With insurance penetration standing at only 0.85 per cent, service providers are looking at all options to increase the industry’s growth, starting with compulsory insurance cover for marine and workers compensation.

The Ugandan government and local insurance companies are missing out on revenues and premiums from exporters and importers who have opted to buy marine insurance policies from foreign companies.

Data compiled by Uganda Insurers Association shows that the latter have received an estimated $335 million in the past four years.

According to the Insurance Act 2011, all exporters and importers are required to take out marine insurance with local companies, but the Insurance Regulatory Authority (IRA) and Uganda Revenue Authority have not been aggressive in enforcing this law.

“There will be premium growth for us when exporters and importers take insurance covers locally. We are looking at a partnership with government to achieve this,” said Miriam Magala, CEO of Uganda Insurers Association (UIA).

IRA CEO Ibrahim Kaddunabbi Lubega said that besides enhancing capacity and growth of local insurance companies, enforcing the Insurance Act 2011 would also make it easier for importers and exporters to follow up on claims.

“There is no international law that requires insurance on exports be taken from the source [exporting country]. However, the Ugandan law says that all exports destined to Uganda should be insured in Uganda,” said the IRA boss.   

There is no restriction on a country to enact laws to protect its domestic insurance industry. Countries such as Burundi, Rwanda, Democratic Republic of Congo, Senegal, Yemen and Uganda have laws demanding mandatory uptake of marine insurance locally for both imports and exports, while Algeria, Bangladesh, Congo Brazzaville, Chad, Ghana, Libya and Kenya place such restrictions on imports only.

Insurers in Uganda have engaged the Ministry of Finance, URA and Uganda Shippers Council to persuade importers and exporters to comply with the law.

So far, IRA has been in talks with URA, which handles the import/export documents that show the cost, insurance and freight of the goods, which helps to determine if the company offering the insurance policy is local or foreign.  

“The majority of traders have been dealing with foreign companies; we want this to change,” said Mariam Nalunkuuma, IRA’s spokesperson.  

David Lukaaga, a clearing agent based in Malaba said the industry regulator has had problems enforcing this law because it does not have direct control over traders.  

“Suppliers oversees source the insurance firms within their countries and so traders have little control,” said Mr Lukaaga.

UIA spokesperson Faith Ekudu, said that the insurance contract depends on the needs of the client and their willingness and ability to pay the premium applied to the service they are receiving.

“It, therefore, follows that if a client’s cargo was to go through a number of countries, the cover can be crafted to cover the items throughout their journey to their destination,” said Ms Ekudu.

With insurance penetration standing at only 0.85 per cent, service providers are looking at all options to increase the industry’s growth, starting with compulsory insurance cover for marine and workers compensation.
The plan is to reach a 2 per cent penetration in the next five years.