ISCOS takes marine insurance to regional neighbours

 

Data compiled by the Uganda Insurers Association in 2015 showed that the Uganda lost an estimated US$335 million over a period of only four years.

A regional shipping agency is now working with industry stakeholders from three East African countries to compel shippers to buy marine insurance from their countries following the successful implementation of a similar initiative in Kenya that started from 1st January this year.

Intergovernmental Standing Committee on Shipping (ISCOS) said that insurance laws in all its member states of Tanzania, Uganda, Zambia and Kenya are clear that all Marine Cargo Insurance (MCI) must be procured from local underwriters.

However, lack of proper coordination between various state agencies has compromised the enforcement of this law with Kenya becoming the first country in Africa to enforce this law. About 28 countries in Africa have put in place this legislation to promote local insurance industries.

A meeting held last year by the Permanent Secretaries of the Ministries of Transport and Trade from ISCOS member states directed that the shipping agency, where they serve as the Coordination Committee, spearhead the Marine Cargo Insurance (MCI) initiative in all the member states as soon as possible.

Ken Mwige, ISCOS Secretary General said that the agency has made significant in-roads in the other three member states. In Uganda, ISCOS is working with the Ministries of Works, Ministry of Transport, the Ministry of Tourism, Trade and Industry and the Uganda Shippers Council (USC) to put in place an implementation mechanism that will make the government to issue a policy statement directing all imports to be insured by Uganda underwriters.

“Since we do not expect any new legislation on this, which would ideally take a longer process, we expect that the matter will go to government soon for policy directive,” Mr Mwige said.

In Zambia, ISCOS is working with Pensions and Insurance Authority of Zambia and the Insurance Association of Zambia (IAZ).

“The insurance industry in Zambia is very keen on this. The government is also very positive and with no internal enemies with vested interests who would oppose such an initiative, we also expect Zambia to follow Kenya suit very soon” Mr Mwige said.

In Tanzania ISCOS has identified the Surface and Marine Transport Regulatory Authority (SUMATRA), a multi-sector regulatory agency, Tanzania Insurance Brokers Association (TIBA), Tanzania Insurance Regulatory Authority (TIRA) and Tanzania Shippers Council (TSC) as working partners.

“We have learnt vital lessons from Kenya and one of the key pillars of successful enforcement of this insurance provision on MCI is to have stakeholders’ participation,” Mr Mwige said.

 

Efforts to have all ISCOS member states insure goods locally was started in 2015 when ISCOS wrote to the governments of Kenya, Uganda, Tanzania and Zambia, pointing out that there was legislation in each Member State requiring importers to procure marine cargo insurance locally and proposed action needed to be taken to protect billions the region was ceding to foreign insurers.

“Every now and then, we would get a trader importing goods seeking help when they incurred losses. There were cases that they did not even have policy documents and in some cases, they were written in incomprehensible languages. And we soon realized that this was a regional problem,” Mr. Mwige noted.

Fortunately, Kenya took action and the Treasury Cabinet Secretary Mr. Henry Rotich issued the policy directive to on-shore marine cargo insurance in his 2016-17 budget speech. KRA was directed by the CS to enforce the often ignored Section 20 (1) of the Insurance Act that requires compulsory procurement of marine insurance from local firms.

A multi-agency committee of Association of Kenya Insurers (AKI), Insurance Regulatory Authority (IRA), ISCOS, Kenya International Freight Forwarders Association (KIFWA), Kenya Revenue Authority and the Department of Shipping and Maritime Affairs has been implementing the CS directive since January through the National Open Single Window System, TradeNet.

KRA is developing an enhanced system which will be accommodative to the new system of Integrated Customs Management System that intends to replace the 10 years old Simba system, the platform through which the MCI will be processed.

“The policy directive from ISCOS’ Coordination Committee gave impetus to ISCOS’ drive to on-shore MCI in the region. The projected savings and retention of hard currency in ISCOS member states’ economies runs into several hundred million dollars every year for the region,” Mr Mwige said.

Burundi, Congo, Kenya, Rwanda, Tanzania, Uganda, Malawi and Zambia, according to ISCOS, exported insurance premiums on marine cargo worth US $ 4.89 billion (KES 489 billion) over a period of 5 years between 2009 and 2013.

Data compiled by the Uganda Insurers Association in 2015 showed that the Uganda lost an estimated US$335 million over a period of only four years.

According to the Uganda Insurance Act 2011, all exporters and importers are required to take marine insurance with local companies, but the Insurance Regulatory Authority (IRA) and the Uganda Revenue Authority have not enforced compliance with this law.

Worldwide, many countries have legislation protecting their local insurance industries. In such cases, countries opt out of international treaties which would require them to ‘liberalize’ their insurance markets – a situation which only benefits foreign, more-developed insurance industries in exporting countries.

Majority of importers buy good on Cost Insurance and Freight (CIF) basis. This according to Mr Mwige is a handoff way of conducting international trade because after paying for imported goods, the East African outsources the arrangement of Freight and insurance to the hard working seller abroad, waiting only at Mombasa or Dar es Salaam ports for the goods to reach there so that they can be cleared.