In International Shipping News 05/10/2016
Shippers Council of Eastern Africa (SCEA) chief executive Gilbert Langat said the government ought to apply the policy — which takes effect in January — to smaller cargo before graduating to bulk cargo such as petroleum and grain.
“If they start with motor vehicles or containerised goods they will be able to deal with any arising problems before moving on to things like petroleum,” he told the Business Daily by phone on Tuesday.
Ships that transport bulk cargo pose high risk for insurers. In comparison, a variety of products carried by a single vessel may be insured by several firms, thus spreading the associated risk.
The proposal to stagger the implementation of the law is part of a list of demands that importers presented to the government yesterday at a meeting with Shipping and Maritime PS Nancy Karigithu, and the Association of Kenya Insurers (AKI).
Mr Langat said that importers want to be assured of the insurance sector’s capacity to handle their business efficiently.
“We want a demonstration of capacity and price competitiveness. They have to meet international standards, for instance, in terms of using online systems to process applications,” he said.
The government has vowed to implement Section 20 of the Insurance Act beginning January next year. In this year’s budget, the Treasury directed the Kenya Revenue Authority (KRA) to facilitate the law’s implementation.
Under the law, importers will be required to show evidence of a contract with a Kenyan insurance firm before their goods are inspected at the source country or cleared locally.
Currently, goods are verified at the source under a system set up by the KRA and the Kenya Bureau of Standards (Kebs).
If the law is implemented by January as planned, it is estimated that the value of marine insurance premiums handled by Kenyan companies would rise to more than Sh20 billion up from Sh2.9 billion in 2015.
At the moment, 15 insurance firms offer marine insurance but the number is expected to rise if the law is implemented.
The AKI has, however, insisted that the local sector is able to handle the expected flood of business. “We don’t have to go out of our way to give incentives. We will price our products properly, competitively… the insurance industry is prepared for this business,” said chief executive, Tom Gichuhi.
Importers expect to meet again with the government and insurance industry players later this month as part of the ongoing negotiations.
Mr Langat said that they have asked insurers to provide evidence of capacity at that meeting.
“They have no option but to meet these standards,” he said.
About 90 per cent of cargo imported into Kenya is underwritten by foreign firms. Importers usually buy insurance as part of a bundled package that includes the cost of the products and shipping.
Some industry stakeholders have argued that the law could help buyers avoid the risks associated with relying wholly on sellers to acquire insurance for their cargo.
It would be easier to for local businesses to claim payments from locally based firms in cases of lost or damaged cargo, said Mr Stanley Chai, the managing director of Ultimate Maritime Consultants.
Source: Business Daily
