Money Markets
Kenya Reinsurance chief executive Jadiah Mwarania. PHOTO | SALATON NJAU
By GEORGE NGIGI, gngigi@ke.nationmedia.com
Reinsurance companies in the country are expected to
reap hugely from the localisation of marine insurance in the New Year as
insurers build capacity to absorb the large business.
A new law requiring all imports to be insured locally is
expected to grow insurance premiums by about Sh20 billion with insurers
passing on the business to reinsurance companies to help absorb the
risk.
“When implemented there will be more in terms of
premiums for primary insurers as well as secondary. We have the
capacity,” said Kenya Re chief executive Jadiah Mwarania.
Premiums collected under marine insurance in the
nine months to September were Sh2.1 billion with reinsurer receiving
Sh515 million, being a quarter of the booked business.
Kenya Re controlled a third of the reinsured marine
business with East Africa Reinsurance taking 31.5 per cent and
Continental 5.6 per cent.
Kenya Re is the largest reinsurer in the country
with insurers mandated by the law to book a fifth of their reinsurance
business with it.
“It will be business as usual – mandatory
cessations not only to Kenya Re but other players will have to be done,”
said Mr Mwarania.
Zep Re which is owned by the 19 countries that
make up the Common Market for Eastern and Southern Africa enjoys a 10
per cent cessation fee while Africa Re, owned by all 53 African states,
gets five per cent compulsory fees.
East Africa Re is a privately owned reinsurer while Continental Re is listed in Nigeria and operates in 43 countries.
Britam
was the largest player in marine insurance controlling 12.6 per cent of
the paid premiums as at end of September, followed by Kenindia, 9.4 per
cent and ICEA Lion 8.7 per cent, according to data from Insurance
Regulatory Authority.
General insurers have been aggressively positioning
themselves to take advantage of the nascent business, which will be a
major contributor in 2017.
There are about 15 underwriters who currently offer marine insurance with the number expected to grow as the business expands.
At Sh20 billion, the marine insurance will
contribute about 11 per cent to the total premiums (Sh170 billion)
currently handled by Kenyan firms.
This will add a key sector to the industry that is currently dominated by motor vehicle and medical classes.
Association of Kenya Insurance has made it
mandatory for insurers interested in the business to have online
portals, a move that has seen insurance companies rush to install the
systems.
About 90 per cent of cargo import insurance is currently
handled by foreign firms, with importers paying the premiums as part of a
package (cost, insurance and freight CIF) to exporters who handle the
underwriting.
The average cost of marine insurance is estimated at about 0.5 per cent of the value of imported goods.
The Kenya Revenue Authority is also eyeing the new
business to help it grow its revenues given that insurance companies pay
a duty equivalent to 0.05 per cent of the insured consignment’s value.
It is estimated that tax collection from marine business will grow by Sh10 billion riding on the new policy
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