By MUTHOKI MUMO, mumumo@ke.nationmedia.com
In Summary
Shippers are pushing for staggered implementation of a
policy that requires importers to purchase marine insurance policy in
Kenya amid concerns over the ability of local underwriters to cover
high-profile sea risks.
Shippers Council of Eastern Africa (SCEA) chief executive
Gilbert Langat said the government ought to apply the policy — which
takes effect in January — to smaller cargo before graduating to bulk
cargo such as petroleum and grain.
“If they start with motor vehicles or containerised
goods they will be able to deal with any arising problems before moving
on to things like petroleum,” he told the Business Daily by phone on Tuesday.
Ships that transport bulk cargo pose high risk for
insurers. In comparison, a variety of products carried by a single
vessel may be insured by several firms, thus spreading the associated
risk.
The proposal to stagger the implementation of the
law is part of a list of demands that importers presented to the
government yesterday at a meeting with Shipping and Maritime PS Nancy
Karigithu, and the Association of Kenya Insurers (AKI).
Mr Langat said that importers want to be assured of the insurance sector’s capacity to handle their business efficiently.
“We want a demonstration of capacity and price
competitiveness. They have to meet international standards, for
instance, in terms of using online systems to process applications,” he
said.
The government has vowed to implement Section 20 of
the Insurance Act beginning January next year. In this year’s budget,
the Treasury directed the Kenya Revenue Authority (KRA) to facilitate
the law’s implementation.
Under the law, importers will be required to show
evidence of a contract with a Kenyan insurance firm before their goods
are inspected at the source country or cleared locally.
Currently, goods are verified at the source under a system set up by the KRA and the Kenya Bureau of Standards (Kebs).
If the law is implemented by January as planned, it
is estimated that the value of marine insurance premiums handled by
Kenyan companies would rise to more than Sh20 billion up from Sh2.9
billion in 2015.
At the moment, 15 insurance firms offer marine insurance but the number is expected to rise if the law is implemented.
The AKI has, however, insisted that the local
sector is able to handle the expected flood of business. “We don’t have
to go out of our way to give incentives. We will price our products
properly, competitively… the insurance industry is prepared for this
business,” said chief executive, Tom Gichuhi.
Importers expect to meet again with the government
and insurance industry players later this month as part of the ongoing
negotiations.
Mr Langat said that they have asked insurers to provide evidence of capacity at that meeting
“They have no option but to meet these standards,” he said.
About 90 per cent of cargo imported into Kenya is
underwritten by foreign firms. Importers usually buy insurance as part
of a bundled package that includes the cost of the products and
shipping.
Some industry stakeholders have argued that the law
could help buyers avoid the risks associated with relying wholly on
sellers to acquire insurance for their cargo.
It would be easier to for local businesses to claim
payments from locally based firms in cases of lost or damaged cargo,
said Mr Stanley Chai, the managing director of Ultimate Maritime
Consultants.
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