Domestic marine cargo covers could boost insurance market

Presently importers insure their cargo in the country of origin through their suppliers

Kampala, Uganda | ISAAC KHISA | For many decades, Uganda’s insurers and reinsurers never imagined that they could cash in on marine cargo insurance business amid the large volume of business involved in international trade.

This is due to the fact that importers, for unknown reasons, insured their cargo on transit via sea, air or land, with foreign insurers, denying domestic insurers of millions of dollars, and hurting their growth.

However the trend is facing a rapid change, thanks to the government’s change of tactic insisting that importers purchase marine cargo insurance from domestic insurers.

This fulfils the ambition of United Nations Conference on Trade and Development’s (UNCTAD) mooted more than 40 years ago, which  advocated  for  domestic insurers  to tap into marine cargo insurance like is the case in Sweden, Germany and France,  for their growth.

Ibrahim Kaddunabi Lubega, the Chief Executive Officer at the Insurance Regulatory Authority (IRA) of Uganda (IRA) told The Independent in an interview that they are rolling out the mandatory domestic purchase of marine cargo insurance service in partnership with the Uganda Revenue Authority (URA) effective January 2020.

Importers will be required to submit their customs clearance documents together with the Marine Cargo Insurance Certificate on the URA Single Window during cargo clearance at the country’s border points.

“Implementation of the initiative will be optional for importers during the first six months of the year,” said Kaddunabi. “However, starting July 2020, all importers will have to buy Marine Cargo Insurance from domestic insurers. Non-compliant importers will face penalties.”

Currently, importers insure their cargo in the country of origin, through their suppliers, a situation industry executives say makes the country lose millions of dollars in foreign insurance business as well as foreign exchange.

Kaddunabi said purchasing marine insurance from domestic insurers will also not only benefit domestic insurers but mostly benefit importers.

“Buying insurance from domestic insurers will create convenience to the importers in lodging claim(s) in the event of a loss or damage to property. This is because the importer will be dealing with domestic insurer(s) who are easy to access,” he said.

“Secondly, there will be faster cover placement and compensation of claims, and thirdly; the importer(s) and exporter(s) will have control on the insurance placed, scope and terms and conditions,” he added.

Kaddunabi said buying insurance from domestic insurers will facilitate growth of domestic insurers as they will have more business and more revenue to facilitate research and development for the benefit of customers.

Though it is difficult to ascertain the amount of money that insurers in Uganda lose as a result of importers using their foreign counterparts, data from the Intergovernmental Standing Committee on Shipping based in Zambia, shows that Uganda, Kenya, Tanzania and Zambia send out a minimum of US$500million annually in insurance premiums. This is through importing on Cost Insurance & Freight (CIF) and exporting on Free on Board (FOB).

Statistics from IRA shows that domestic insurers have recorded a minimal growth in marine and aviation premiums from Shs 24.5bn in 2013 to Shs 33.2bn in 2018.

Yet the value of the country’s exports and imports have increased from US$2.8bn and US$6bn to US$3.6bn and US$7.4bn during the same period under review, according to Bank of Uganda.

Other countries making similar move

Several African countries including Kenya, Tanzania and Zambia under their umbrella organisation, Intergovernmental Standing Committee on Shipping (Iscos) are also pursuing similar initiatives to end expatriation of millions of dollars in marine insurance premiums.

The Tanzania Insurance Regulatory Authority (TIRA) in collaboration with Insurance Institute of Tanzania (IIT) has unveiled a digital platform portal that helps Tanzania importers to buy insurance covers from domestic insurers for all imported goods in the country as required by the amendment of Article No. 133 of the Insurance Act of 2009.

The Tanzania Imports Insurance Portal (TIIP) (www.tiip.co.tz) is currently active and available for use by all importers, clearing agents, insurance agents, insurance brokers and companies. The platform covers imports either by road, rail, sea or air.

Tanzania Revenue Authority now requires proof of purchase of Tanzanian marine insurance prior to issuance of import clearance.

Neighboring Kenya approved the Marine Cargo Insurance Policy in 2016 to ensure that importers and exporters insure their goods with domestic insurers instead of using foreign insurers.

Like in Tanzania, Kenya Revenue Authority requires importers to use domestic insurers for marine insurance and it is used as one of the preconditions during cargo clearance.

Section 20, Subsection (1) of the Insurance Act, CAP 287 states that “No insurer, broker, agent or other person shall directly or indirectly place any Kenya business other than re-insurance business with an insurer not registered in Kenya without the prior approval, whether individually or generally, in writing of the Commissioner.”