Reinsurance firms to gain from local cover on imports
Reinsurance companies in the country are expected to reap hugely from the localisation of marine insurance in the New Year as insurers build capacity to absorb the large business.
A new law requiring all imports to be insured locally is expected to grow insurance premiums by about Sh20 billion with insurers passing on the business to reinsurance companies to help absorb the risk.
“When implemented there will be more in terms of premiums for primary insurers as well as secondary. We have the capacity,” said Kenya Re chief executive Jadiah Mwarania.
Premiums collected under marine insurance in the nine months to September were Sh2.1 billion with reinsurer receiving Sh515 million, being a quarter of the booked business.
Kenya Re controlled a third of the reinsured marine business with East Africa Reinsurance taking 31.5 per cent and Continental 5.6 per cent.
Kenya Re is the largest reinsurer in the country with insurers mandated by the law to book a fifth of their reinsurance business with it.
“It will be business as usual – mandatory cessations not only to Kenya Re but other players will have to be done,” said Mr Mwarania.
Zep Re which is owned by the 19 countries that make up the Common Market for Eastern and Southern Africa enjoys a 10 per cent cessation fee while Africa Re, owned by all 53 African states, gets five per cent compulsory fees.
East Africa Re is a privately owned reinsurer while Continental Re is listed in Nigeria and operates in 43 countries.
Britam was the largest player in marine insurance controlling 12.6 per cent of the paid premiums as at end of September, followed by Kenindia, 9.4 per cent and ICEA Lion 8.7 per cent, according to data from Insurance Regulatory Authority.
General insurers have been aggressively positioning themselves to take advantage of the nascent business, which will be a major contributor in 2017.
There are about 15 underwriters who currently offer marine insurance with the number expected to grow as the business expands.
At Sh20 billion, the marine insurance will contribute about 11 per cent to the total premiums (Sh170 billion) currently handled by Kenyan firms.
This will add a key sector to the industry that is currently dominated by motor vehicle and medical classes.
Association of Kenya Insurance has made it mandatory for insurers interested in the business to have online portals, a move that has seen insurance companies rush to install the systems.
About 90 per cent of cargo import insurance is currently handled by foreign firms, with importers paying the premiums as part of a package (cost, insurance and freight CIF) to exporters who handle the underwriting.
The average cost of marine insurance is estimated at about 0.5 per cent of the value of imported goods.
The Kenya Revenue Authority is also eyeing the new business to help it grow its revenues given that insurance companies pay a duty equivalent to 0.05 per cent of the insured consignment’s value.
It is estimated that tax collection from marine business will grow by Sh10 billion riding on the new policy.
