February 1, 2017
Regulation requires Kenya to only use local insurers.
The Kenya Revenue Authority (KRA) was ordered to start enforcing Section 20 of the Insurance Act beginning 2017. It states that “no insurer, broker, agent or other person shall directly or indirectly place any Kenya business other than reinsurance business with an insurer not registered under this Act without the prior approval, whether individually or generally, in writing of the Commissioner.” It effectively requires that businesses obtain marine cargo insurance written by local insurers that are registered under the Act. This was an existing regulation, but it was previously not fully implemented or enforced. To help with the transition, the KRA and other associations have set up a taskforce to consult on the process and mange any problems that the trade may encounter.
According to an article in the Daily Nation, approximately 90% of the cargo insurance in Kenya was written by foreign firms. This change may create a challenge for local importers that will now have to use new insurers with potentially higher premiums. There is also concern over whether insurers can properly handle both a larger volume of business and higher limits. Large and high risk shipments are of special concern. The other issue is how effective and efficient the insurers will be when dealing with claims. Only time will tell whether the enforcement of this Act is good for business. For insurers, this change provides opportunities and challenges. They will now write policies that may be larger than they typically do and on a greater variety of goods. This may pave the way for local insurers to increase their operations and premiums and thereby, their revenue. Some insurers have created online portals to process the anticipated influx of business. The Kenyan government will also benefit from this increased revenue since insurance companies pay duties.
As dictated by this regulation, Avalon will no longer be offering marine cargo insurance on shipments to Kenya. If you have any questions, please contact your local Avalon representative.