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Insurers shift to IRA customs bond verification platform after Kenswitch fallout
Port of Mombasa. Lobby says insurers migrated to the charge-free IRA platform last year following a dispute over a 0.125 percent fee required to use Kenswitch.
Insurance companies in Kenya have shifted to a customs bond verification platform owned by the Insurance Regulatory Authority (IRA) after a fallout with an intermediary firm, Kenswitch, over service fees.
The insurers’ lobby, the Association of Kenya Insurers (AKI), says the underwriters migrated to the charge-free IRA platform last year following a dispute over a 0.125 percent fee required to use Kenswitch.
“The IRA created a platform, and that is the platform that the insurance companies are now using for bond verification because this one is connected to the KRA (Kenya Revenue Authority). It is now seamless. We are now 100 percent ok,” AKI chief executive officer, Tom Gichuhi, told Business Daily.
The customs bonds insurance policy is a surety to KRA that insurers will be held liable for all duties, taxes, fees, and penalties connected with the goods if the importing firms default on payment. KRA only clears the goods after evidence of insurance-backed bonds.
“They (IRA) are the ones who stepped in because, if you remember, there was actually very bad blood between AKI and Kenswitch, so there was no way anybody was to come in and sort that out, and that is how IRA stepped in,” Mr Gichuhi said.
Kenswitch Limited had been onboarded by the KRA in 2018 at the request of IRA to provide a platform for submitting the original hard copy of the bonds to the taxman before goods can be cleared. The firm initially offered free services but later introduced a fee equivalent to 0.125 percent of the value of the customs bond—resulting in a fallout with insurers.
According to insurers, Kenswitch started demanding the fee in November 2023 and even switched off the system in August 2024, demanding that insurers, banks, and clearing agents start paying.
Insurers, however, rejected Kenswitch’s demands, terming the demanded 0.125 percent fee “outrageous” given that they earn 0.1 percent of the value of the bond as their premium to take on the risk of default on duties, taxes, and fees.
The impasse led to a pile-up of goods at various customs points in September 2024 since KRA’s integrated customs management system (ICMS) only accepts bonds authorised through the Kenswitch system, without which goods cannot be cleared.
Faced with mounting shipment pile-ups at the ports and a fractured relationship with Kenswitch over pricing and procurement concerns of the financial services company, the insurers, in collaboration with the IRA, mooted a plan to build a zero-fee independent customs bond verification platform.
Kenswitch has, however, defended itself, saying the fees would support its operations.
Section 16A and Section 20(4) of the Marine Insurance Act require all imported cargo destined for Kenya to be insured by companies licensed by the IRA, with an aim of boosting the local insurance industry, increasing revenue and ensuring greater insurance coverage over imports.
