Regulatory update: Cargo insurance in Kenya Nairobi - May 11 th 2017 Aon Risk Solutions
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Marine Cargo Insurance The basis
Scope of Marine Cargo Insurance Aon Risk Solutions 4
Marine Cargo Insurance Provides insurance cover for goods: During transit (sea, and/or land and/or air) On every conveyance (train, truck, vessel, barge, etc) Warehouse to warehouse During storage (in the ordinary course of transit and stand-alone storage) Aon Risk Solutions 5
Marine Cargo Insurance Insurance policies are always based on standardised insurance conditions In principle, only damages to the goods from external causes are covered Different forms of cover are available Aon Risk Solutions 6
Marine Cargo Insurance Institute Cargo Clauses (C) Fire or Explosion Vessel or craft stranded, grounded, sunk or capsized Overturning or derailment land conveyance Collision or contact conveyance with any external object other than water Discharge cargo at port of distress General average Jettison Aon Risk Solutions 7
Marine Cargo Insurance Institute Cargo Clauses (B) Fire or Explosion Vessel or craft stranded, grounded, sunk or capsized Overturning or derailment land conveyance Collision or contact conveyance with any external object other than water Discharge cargo at port of distress General average Jettison or washing overboard Earthquake, volcanic eruption, lightning Entry of water Total loss of cargo lost overboard, dropped during loading/unloading Aon Risk Solutions 8
Marine Cargo Insurance Best Option: Institute Cargo Clauses A: All Risks Cover for all external causes, unless excluded Aon Risk Solutions 9
Marine Cargo Insurance, exclusions In general, Marine Cargo does not cover: Inherent Vice War-on-Land Terrorism risk during storage Credit risks Political risks Liability risks Radioactive contamination (always excluded) Aon Risk Solutions 10
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Incoterms to be used for carriage by sea FAS Free alongside Ship ( named port of shipment) FOB CFR Free on Board ( named port of shipment) Cost and Freight ( named port of destination) CIF Cost, Insurance and Freight ( named port of destination) Aon Risk Solutions 12
CIF Sale Insurance certificate: Document for the receiver Summary of the insured journey: Quantity Value Vessel name Port of loading Port of discharge BL date Summary of the insurance cover LC requirements Instructions for the event of a claims Aon Risk Solutions 13
Marine Cargo Insurance The situation in Kenya
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Situation in Kenya In 2016 Kenya imported KES 1.43 trillion worth of goods For marine cargo insurance, 90% of the on these imports are insured outside Kenya However, Kenyan insurance legislations requires that marine cargo insurance on Kenyan imports is taken out with Kenyan insurers. Up to 1 st January, 2017 this requirement was not being enforced by local authorities What is the current situation? Aon Risk Solutions 17
The Government Directive 68. Further, Mr. Speaker, and in order to support the insurance industry in Kenya, Section 20 of the Insurance Act expressly prohibits placement of Kenyan Business with non-kenyan or foreign insurance markets except under certain circumstances. Despite the existence of the law, imports into Kenya continue to be on a Cost, Insurance and Freight basis instead of Cost and Freight basis. In effect Mr. Speaker, this denies insurance companies registered in Kenya huge business that could substantially benefit the industry and the economy as well. To address this Mr. Speaker, I am directing the Kenya Revenue Authority to work with the relevant stakeholders to ensure that this part of the law is implemented. Mr. Speaker, this will also be beneficial to Kenyan importers who under the current practice have limited recourse if anything happens to their imports before they arrive in the country. - From the Budget Statement for the Fiscal Year 2016/2017 Themed: Consolidating Gains for a Prosperous Kenya By Mr. HENRY K. ROTICH, EGH Cabinet Secretary for The National Treasury on June 08, 2016, section on Financial Sector Stability and Development, paragraph 68. Summarizing: Kenyan imports have to be insured with a Kenyan insurer Big boost for the Kenyan insurance industry Aon Risk Solutions 18
Consequences of the Directive Marine cargo insurance has been localized It is still not compulsory to insure cargo Marine cargo insurance is being digitized via an agency called Kentrade Fine for not complying: KES 10,000.- or 1 year in prison Aon Risk Solutions 19
Marine Cargo insurance in Kenya Before cargo is cleared at point of entry, cargo owner presents a Kenyan Marine Cargo insurance certificate The premium cost in the certificate is used by Customs in computing duty on the goods If there is no certificate Customs assumes insurance would have been taken out @ 1.5% of value of goods Aon Risk Solutions 20
Digitization of Marine Cargo Insurance The desired situation with Kentrade portal: Each entry and clearance will need to be done electronically through Kentrade Portal Importer need to complete a form in the portal and attach an insurance certificate for each import Aon Risk Solutions 21
Kenyan Insurance market Variety of insurance companies available Multinationals Local In general, individual company have relatively small capacity available compared to international cargo markets Co-insurance is not common practice which can again lead to capacity problems Up to recently, cargo insurance was offered as a side product Aon Risk Solutions 22
Marine Cargo insurance in Kenya Marine cargo insurance markets in Kenya are rapidly developing although there are challenges to overcome Capacity Experience/skills Enforcement Local insurance will become increasingly important once the Directive is fully implemented If successful, Uganda and Tanzania are likely to follow the Kenyan example Aon Risk Solutions 23
Questions? Njau Ndung u Njau.Ndungu@aon.co.ke Tel. number +254 20 497 4345 Walle Romijn walle.romijn@aon.nl Tel. number +31 20 430 5865/+31 6 462 010 37 Aon Risk Solutions 24