Insurers and the Kenya Revenue Authority (KRA) have agreed on manual clearance of custom bonds insurance on a temporary basis, as the underwriters resolve a standoff with an intermediary over newly imposed fees.
The stop-gap measure has taken pressure off importers who had endured weeks of pile-up of thousands of shipments after Kenswitch Limited, a company that had been providing a platform for transmitting the original hard copy of the bonds to KRA, switched off the system demanding payment.
Insurers offer custom bonds insurance policy as a surety to KRA that they will be held liable for all duties, taxes, fees and penalties connected with the goods if the importing firms default on payment.
KRA only clears the goods on evidence of insurance-backed bonds.
Kenswitch has been offering the service for free but started demanding 0.125 percent of the value of the customs bond, forcing insurers to snub the system.
The fee being demanded is more than the 0.1 percent that insurers collect as premiums for assuming the risk of default on duties, taxes and fees.
Insurers say they have reached a deal with KRA, through the Insurance Regulatory Authority (IRA), allowing the taxman to receive the bonds without using Kenswitch system.
“The status as of now is that the Association of Kenya Insurers has had a discussion with the IRA and the regulator has held talks with KRA. So we have gone back to manual processing,” said Leonard Chirchir, head of underwriting and reinsurance at Britam General Insurance Company.
“Instead of onboarding the documents into the Kenswitch system for them to be signed electronically, the clients go to KRA with the physical bond for the approval. If we use that [Kenswitch] service and start paying, then the cost will go to clients and it will become very expensive to buy custom bonds.”
Mr Chirchir spoke in an interview with the Business Daily this publication after Britam’s marine insurance masterclass themed ‘Marine insurance in a digital world.”
The event highlighted the evolving role of marine insurance in mitigating risks associated with international trade, which is crucial for Kenya’s position as a regional trade hub.
Starting January 2017, it became compulsory for all marine cargo imports to be locally insured after changes to the Insurance Act.
Britam, with a market share of 13.2 percent or Sh618 million of the 2022 premiums, has been riding on its digital portal to recruit more customers. The system allows customers to buy the cover and lodge claims online.
“The ability to handle every aspect of marine insurance, from obtaining quotes to filing claims, on a single digital platform, is a game-changer. We’re making marine insurance more accessible and efficient for our clients,” said Tom Gitogo, chief executive Britam Group.
Marine and transit insurance has been growing, with premiums hitting Sh4.41 billion last year, a 5.2 percent growth from Sh4.19 billion in the previous year and 34 percent rise in the past five years when compared with Sh3.28 billion in 2019.
While the market has registered growth, insurers say that implementation has been low, meaning that local insurers are still losing business to foreign insurers.
