From February 2025: What You Need to Know About Locally Issued Marine Cargo Insurance in Kenya
The Insurance Regulatory Authority (IRA) of Kenya has announced a significant regulatory change that will impact the marine cargo insurance landscape in the country.
Starting February 14, 2025, all imports into Kenya will require locally issued marine cargo insurance. This directive aims to enforce compliance with the Marine Insurance Act of 2017 and is expected to reshape the insurance industry while promoting local underwriting.
Overview of the New Regulation
The new regulation mandates that all goods imported by land, sea, or air must be insured with a local insurance company. This requirement is part of a broader strategy to retain a portion of the KES 21 billion (approximately USD 209 million) in annual marine insurance premiums that have traditionally been underwritten by foreign insurers.
In contrast, local marine premiums generated only KES 2.9 billion (around USD 28.8 million) in previous years, highlighting a significant gap that the IRA aims to close through this initiative.
Objectives of the Regulation
- Enhancing Local Capacity: By mandating local insurance, the IRA seeks to bolster the capacity and competitiveness of Kenyan insurers, ensuring they can meet the growing demand for marine cargo coverage.
- Revenue Retention: The regulation aims to keep more insurance premiums within Kenya, supporting local businesses and contributing to economic growth.
- Compliance with Legal Frameworks: The enforcement of this regulation aligns with the provisions set out in the Marine Insurance Act of 2017, which emphasizes the need for comprehensive coverage for imported goods.
Implications for Importers and Insurers
For Importers
- Increased Costs: Importers may face higher costs as they will need to secure local marine insurance policies, which could differ from their previous arrangements with foreign insurers.
- Compliance Requirements: The Kenya Revenue Authority (KRA) has indicated that it will not clear goods lacking a valid local marine insurance cover, making compliance essential for smooth import operations.
For Insurers
- Market Opportunities: Local insurers will have new opportunities to expand their portfolios and develop tailored products for marine cargo insurance.
- Need for Competitive Pricing: Insurers will need to offer competitive pricing and comprehensive coverage options to attract clients who may have previously relied on foreign insurers.
Historical Context
The push for locally issued marine cargo insurance is not entirely new. Since January 1, 2017, regulations have been in place requiring imported goods to be insured locally; however, compliance has been inconsistent. The IRA’s latest directive serves as a reinforcement of these earlier measures, aiming to ensure that all stakeholders adhere to the established legal framework.
Previous Regulatory Measures
- Marine Insurance Act of 2017: This act was designed to regulate marine insurance practices in Kenya and ensure that insurers operate within a structured legal environment.
- Initial Compliance Challenges: Despite existing regulations, many importers continued using foreign insurers due to perceived cost benefits or lack of awareness regarding local options.
Future Outlook
As the February 2025 deadline approaches, stakeholders across the supply chain must prepare for these changes. Importers should begin engaging with local insurers to understand their options and secure necessary coverage ahead of time. Meanwhile, insurers should focus on developing robust products that meet the diverse needs of importers while ensuring they remain competitive in pricing.
Recommendations for Stakeholders
- Awareness Campaigns: The IRA and KRA should launch awareness campaigns targeting importers to educate them about the new regulations and available local insurance options.
- Training for Insurers: Local insurers may benefit from training programs aimed at enhancing their understanding of marine risks and developing innovative products tailored for different sectors.
- Monitoring Compliance: Continuous monitoring and evaluation mechanisms should be established by regulatory authorities to ensure compliance and address any challenges faced by stakeholders.
Read Also
For more insights on marine insurance in Kenya, check out this article:Â An Introduction to Marine Insurance in Kenya: Protecting Your Cargo on the High Seas.
Conclusion
The introduction of mandatory locally issued marine cargo insurance marks a pivotal moment for Kenya’s insurance sector. By aligning with international best practices and promoting local underwriting, this regulation not only aims to strengthen the domestic market but also seeks to protect Kenyan businesses from potential risks associated with international trade.
As all parties prepare for this transition, proactive engagement and collaboration will be crucial in navigating this new regulatory landscape successfully.
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