Real value of local marine insurance

The risks inherent in global trade remain a constant concern for Kenyan businesses. From potential losses due to theft and damage to disruptions caused by shipping delays, importers face a complex web of challenges.

Marine insurance plays a vital role in mitigating these risks. However, many Kenyan firms have historically ceded control by relying on foreign insurance providers.

The amendment to the Marine Insurance Act (CAP 390) and the Insurance Act (CAP 487), effective February 2025, mandates that Kenyan importer secure marine cargo insurance from locally licensed insurers before customs clearance.

This policy shift presents a strategic opportunity to bolster local businesses and strengthen the domestic insurance sector.

Previously, relying on insurance from the country of origin created significant challenges in claims processing. Navigating unfamiliar legal systems and procedures often resulted in costly delays.

Local sourcing streamlines this process, providing access to a familiar legal framework and efficient claims resolution.

Marine insurance gives a spectrum of coverage options, protecting both cargo and vessels. Understanding these options is crucial for informed decision-making.

Kenyan insurers offer marine cargo insurance, safeguarding goods against risks like damage, fire, theft, and natural disasters, as well as marine hull insurance, protecting the vessel itself.

Internationally, the scope of marine insurance expands to include hull and machinery insurance, various cargo insurance policies, liability insurance, and freight insurance.

However, many importers treat marine insurance as a mere formality, often opting for minimal coverage that leaves them vulnerable. In contrast, comprehensive coverage is a strategic investment, safeguarding financial stability and supports business continuity in the face of unforeseen events.

Unfortunately, some importers treat marine insurance as just a compliance requirement, preferring to take up minimal coverage that falls short of fully protecting them against potential risks. Minimal marine insurance is a dangerous gamble.

A comprehensive policy, on the other hand, protects businesses against a wide range of risks and perils, ensuring financial stability and peace of mind.

Read:  Why Kenya’s marine insurance uptake is a strategic necessity

Marine insurance is poised to play a transformative role in Kenya's import sector. By embracing local sourcing and prioritising comprehensive coverage, Kenyan importers can not only safeguard their businesses, contribute to the growth of the domestic insurance industry, but also strengthen the national economy.

This is a strategic imperative that demands immediate attention.

Despite the mandate for local marine cargo insurance being introduced in 2017, uptake remains low due to a range of interconnected challenges. Competition from international insurers, who often bundle insurance with freight services, presents a significant hurdle.

Many importers are also unaware of the benefits offered by local marine insurance. Regulatory challenges, inconsistent enforcement, and a skills gap within the Kenyan marine insurance sector further complicate the landscape.

Additionally, the continued preference for procurement from overseas markets, coupled by negative perceptions about local insurers' capacity and pricing all have contributed to the sluggish uptake. Addressing these issues requires a concerted effort to bridge the digital divide, enhance collaboration among stakeholders, and streamline digital integration.

To increase marine insurance uptake, a multi-pronged approach is essential. This includes improving awareness and education through targeted campaigns, training programs, and collaborations with industry stakeholders.

Enhancing accessibility and affordability is also key, which can be achieved by developing user-friendly digital platforms and offering flexible payment options.

Building trust and confidence requires transparent claims processing, a strong regulatory framework, support for local capacity building, and proactive engagement to address concerns. Furthermore, leveraging technology such as data analytics, cargo tracking, and automated processes can significantly enhance the efficiency and effectiveness of marine insurance.

Finally, consistent enforcement of regulations mandating local marine insurance, alongside close collaboration with enforcement agencies, is crucial to ensure compliance and promote the growth of the domestic market.

Industry stakeholders must also step up and leverage platforms such as clearing and forwarding agents' congresses and meetings to sensitize stakeholders in the marine freight sector.

By sharing knowledge and highlighting success stories, they can dispel misconceptions and drive greater uptake of marine insurance.

The insurance legislation that came into effect in February 2025 simplifies the process of procuring marine insurance, making it easier for importers to obtain the necessary coverage. This is a welcome development that will further encourage local sourcing.

The author is the MD Equity Bancassurance Intermediary Limited