Kenya’s dynamic import and export sectors play a pivotal role in the country’s economy, facilitating the movement of goods between Kenya and the world. As the global trade landscape evolves, so too must the systems that underpin it. In response to both domestic and international trade needs, the Kenyan government has introduced a significant regulatory shift aimed at enhancing the efficiency, transparency, and safety of the marine cargo insurance process.
Following the enactment of the Finance Act 2017, significant amendments were made to both the Marine Insurance Act (Cap 390) and the Insurance Act (Cap 487) Laws of Kenya. These amendments mandated that all marine cargo insurance for goods entering the country must be sourced from locally licensed insurers. This change came as part of broader efforts to bolster the local insurance sector and ensure that Kenyan businesses and traders benefit from comprehensive insurance coverage.
In a bid to streamline and digitize this process, the Insurance Regulatory Authority (IRA) and the Kenya Revenue Authority (KRA) have announced a new system that will require all importers to procure digital Marine Cargo Insurance (MCI) before obtaining customs clearance. This shift will take effect on February 14, 2025, ushering in a new era of simplified, secure, and efficient insurance practices for Kenya’s importers.
This article explores the implications of these regulatory changes, the steps involved in complying with the new system, and how importers can benefit from the digitization of marine cargo insurance.
Background: The Need for a Change in Marine Cargo Insurance
Marine cargo insurance has always been a vital part of the logistics and supply chain process in Kenya. As one of East Africa’s largest and busiest ports, the Port of Mombasa is a critical entry point for goods into Kenya, with a vast array of imports arriving from all corners of the globe. However, until recently, the process of securing marine cargo insurance has often been marred by inefficiencies, lack of transparency, and issues surrounding compliance with local regulations.
Prior to the enactment of the Finance Act 2017, businesses were allowed to procure marine cargo insurance from foreign insurers, leading to a gap in the local insurance market. This situation not only exposed Kenyan businesses to risks of non-compliance but also resulted in a drain on resources from the local economy.
The legislative changes introduced by the Finance Act 2017 and subsequent amendments have directly addressed these issues. By mandating that all marine cargo insurance policies be sourced from locally licensed insurers, the government seeks to stimulate the growth of the local insurance industry, ensure better coverage for Kenyan importers, and improve overall regulatory compliance.
Understanding the New Regulations: What Importers Need to Know
The amendments introduced by the Finance Act 2017 and the Statute Law (Miscellaneous Amendments) Act 2017 include several key provisions that will affect Kenyan importers:
- Local Insurance Requirement:
The most significant change is the requirement for all marine cargo insurance policies to be obtained from insurers that are locally licensed under the Insurance Act (Cap 487). This ensures that Kenyan insurers can provide coverage for goods imported into the country, thereby stimulating growth in the local insurance sector and promoting regulatory adherence. - Digitization of the Marine Cargo Insurance Process:
As of February 14, 2025, importers will be required to procure their marine cargo insurance digitally. The process will be integrated with the Insurance Regulatory Authority’s (IRA) electronic platform, ensuring that insurance certificates are processed, verified, and issued in a more efficient manner. This move will reduce the time and complexity traditionally associated with obtaining marine cargo insurance and streamline the entire process. - Customs Clearance Integration:
The digital marine cargo insurance certificates will be linked to Kenya Revenue Authority’s Integrated Customs Management Systems (ICMS). This integration will facilitate quicker customs clearance processes, reducing delays and ensuring that all goods entering the country are adequately insured before they are cleared through customs. - Mandatory Insurance Coverage:
Importers will be required to secure marine cargo insurance coverage before obtaining customs clearance for their goods. This requirement ensures that the goods entering Kenya are fully protected against potential risks such as damage, theft, or loss during transit.
How the Digital Marine Cargo Insurance System Will Work
To comply with the new requirements, importers will need to navigate a series of digital steps to secure marine cargo insurance. Here’s a breakdown of the process:
Step 1: Accessing the Digital Marine Cargo Insurance Certificate
Importers will begin by logging into one of several available platforms that are integrated with the IRA’s electronic system. These platforms include:
- Coral Mini App hosted on the M-PESA Super App
- Coral Web-Based Portal
- Insurance Underwriters’ Web-Based Portals
- Insurance Underwriters’ Mobile Mini Apps hosted on M-PESA
- Kentrade Single Window Portal
Through these portals, customers can access their Import Declaration Form (IDF), which contains all the necessary details regarding their imported cargo. Once logged into any of these platforms, the customer can pull up their IDF by entering the unique IDF number.
Step 2: Entering Required Details
Once the IDF is retrieved, customers will fill in the necessary fields to complete their digital marine cargo insurance certificate. This includes providing relevant details about the goods being imported and specifying the type of coverage required. Importers will then proceed to pay the applicable premiums, which are set by the locally licensed insurance companies.
Step 3: Submission to the IRA Platform
After completing the digital marine cargo insurance certificate and paying the premiums, the insurance certificate will be submitted electronically to the IRA’s platform. This system is directly integrated with the Kenya Revenue Authority’s Integrated Customs Management Systems (ICMS).
Step 4: Verification and Customs Clearance
Once the digital marine cargo insurance certificate is processed, the IRA will send a confirmation to the Kenya Revenue Authority. Upon receipt, the KRA will verify the insurance details and approve the clearance of the goods through the customs system. This step marks the finalization of the customs clearance process, allowing the goods to be released for further handling or distribution.
Step 5: Confirmation to the Importer
After successful verification and submission of the digital marine cargo insurance certificate to the KRA, the importer will receive confirmation of compliance. This confirmation signifies that all legal and regulatory requirements have been met, and the goods are cleared for entry into the Kenyan market.
Benefits of the New Digital System for Importers
The new digital marine cargo insurance system is set to offer several key benefits to Kenyan importers, including:
- Efficiency and Convenience:
Importers no longer need to deal with lengthy paper-based processes to secure insurance. The digital system will streamline the insurance procurement and customs clearance process, reducing time delays. - Cost-Effective:
With the integration of the system, the process will become more transparent, potentially lowering the cost of obtaining marine cargo insurance. Importers will also have better access to competitive rates from locally licensed insurers. - Improved Regulatory Compliance:
The new system will ensure that all importers comply with the legal requirements for marine cargo insurance, reducing the risk of penalties or delays at the port. - Support for Local Insurance Industry:
By mandating the use of locally licensed insurers, the new regulations aim to foster the growth of the Kenyan insurance industry, creating more opportunities for local companies and professionals.
Challenges and Considerations for Importers
While the digital system offers numerous advantages, there are some considerations and challenges that importers should be aware of:
- Digital Literacy:
Some importers, especially smaller businesses, may face challenges in adapting to the new digital platforms. It will be essential for all stakeholders in the importation process to receive adequate training on using the new system. - System Integration and Technical Issues:
The success of the digital marine cargo insurance system depends on seamless integration between various platforms (insurance providers, KRA, IRA, etc.). Any technical glitches could disrupt the clearance process. - Transition Period:
Importers may face a learning curve as they familiarize themselves with the new system. However, given the deadline of February 14, 2025, stakeholders must act quickly to adapt to the changes.
Embracing the Future of Marine Cargo Insurance in Kenya
The introduction of the digital marine cargo insurance system marks a significant milestone for Kenya’s import sector. By simplifying the insurance procurement process and ensuring compliance with local regulations, this system offers immense benefits to businesses, consumers, and the economy at large. Importers who take the time to familiarize themselves with the new system will be well-positioned to navigate the evolving landscape of global trade.
As the deadline approaches, it is crucial for all stakeholders—importers, clearing agents, insurance companies, and regulators—to collaborate and ensure a smooth transition to the new system. With the right preparation, Kenya’s import sector will be better equipped to face the challenges of the future while capitalizing on the opportunities offered by the digital age.