The World Economic Forum estimates that 90 percent of goods transported around the globe pass through the seas. Marine transport is therefore undoubtedly the backbone of global trade.
Closer home, the Port of Mombasa handled over 41.1 million tonnes of goods in 2024 alone, marking a 14.2 percent rise from the preceding year. This not only underscores the crucial role of the port as an economic enabler within the Eastern and Central Africa region, but also the significant reliance on maritime transport in this region.
Marine risks abound and no better remedy has proven to be effective as insurance. However, for the longest, marine insurance, which serves to alleviate risks that face maritime traders, was mostly underwritten by foreign-based insurance firms. This led to capital flight and lost opportunities for the domestic insurance industry in terms of premium income.
To tap into the huge premium base, the Kenyan government directed that all marine cargo insurance be procured locally. This policy sought to revitalise the local industry growth, increase revenue retention, and enhance economic sovereignty. Before the directive, Kenya was losing estimated marine insurance premiums of Sh20 billion to foreign-based underwriters.
The directive slightly increased the marine insurance premiums with a notable movement reaching Sh4.41 billion in 2022, a 5.2 percent growth from 2021, and a 63.3 percent increase compared to Sh2.7 billion in 2016, before the directive.
However, compliance challenges persisted. This has forced the Insurance Regulatory Authority (IRA) and Kenya Revenue Authority (KRA) to push for a full implementation starting February 14, 2025. If fully adhered to, it could go a long way in improving the insurance penetration in the industry and boost the marine portfolio, currently just at a paltry 2.3 percent of the total general insurance premiums in Kenya.
The shift toward local underwriting will encourage the local insurance players to focus resources on developing internal resources, digital and technological innovations and deepen partnerships with key stakeholders. Increased local insurance would provide extensive coverage from loss and damage to cargo, piracy, and geopolitical risks affecting maritime routes.
The IRA and KRA move could earn Kenya over Sh20 billion annually, thereby significantly boosting the economy through GDP growth and creation of jobs.
Leading reinsurance firms in the region such as Kenya Re play a critical role in aiding local insurance companies to offer the necessary protection to their clients. Through risk sharing, technical expertise and prompt claims settlement, they ensure that local insurers can cater for the needs of their clients promptly.
Marine insurance faces huge risks, notably, shipwrecks, changing weather patterns, piracy, and disruptions in supply chains due to issues such as geopolitical tensions.
Reinsurers offer sustainable protection to marine insurance providers by absorbing large claims that could otherwise cripple the cedants, thereby ensuring their liquidity.
By deploying emerging solutions like parametric insurance, blockchain technologies in cargo tracking, as well as artificial intelligence in risk assessment, reinsurance can drive the much needed product innovation and development thereby enhancing underwriting efficiency.
Collaboration with maritime sector players and local insurance firms, could greatly enhance uptake by focusing on educating traders about what they stand to gain, by having in place adequate insurance coverage for their cargo.
Challenges in terms of technological gaps persist, even though some insurers have gone digital in terms of their marine processes. But newer and better technologies such as internet of things-based cargo monitoring and blockchain smart contracts could revolutionise marine insurance offerings.
Technology is a core pillar in the advancement of insurance uptake, as such, insurers have to invest in new forms of technology such as AI-driven risk analytics, satellite tracking, and blockchain for transparent claims processing and fraud prevention.
In conclusion, it is time to deepen the local underwriting capacity, enforce compliance, and leverage technological advancements while forging strategic alliances so that Kenya can retain billions of shillings in this sector within its economy.
Reinsurers should work to enhance their retro capacities in anticipation of the growth of marine premiums while at the same time developing their capacity in areas that require specialised skills such as risk modelling and loss prevention.
Through enhanced public awareness campaigns that entail conducting thorough training for importers about the financial benefits of marine insurance, uptake will improve.
It is imperative that this time, IRA, KRA and other enforcement agencies put forth the necessary measures to ensure that there is a 100 percent compliance with local marine insurance directive, to ensure that importers do not continue giving business to foreign underwriters.
The writer is the group managing director at Kenya Reinsurance Corporation
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