A new maritime insurance law in Kenya does little to benefit the region’s reinsurers that are already operating in a challenging and shrinking marketplace, according to industry experts close to the matter.
Section 20 of the Insurance Act reportedly makes it mandatory for local cargo importers to insure goods with local insurance companies, but there’s nothing in the law that incentivises firms to reinsure the risk with local reinsurers.
As a result, industry experts have expressed their concern with the new marine insurance law, claiming that it does very little to benefit the local reinsurance market, which is already under pressure.
Jadiah Mwarania, the Chief Executive Officer (CEO) of Kenya Reinsurance Corporation (Kenya Re), explained that insurers stand to benefit the most from the new law.
“We have three re-insurance companies operating in Kenya today. There is nothing much for us to reap from the windfall expected when this law is fully entrenched. The law has little room to make it mandatory for underwriters benefiting from marine premiums to re-insure that risk,” said Mwarania, reported Standard Media.
By the end of 2016 premiums reported by Kenya’s reinsurers totalled Sh17.6 billion (roughly $171 million), compared with Sh18.4 billion (roughly $179 million) a year earlier, which represents a decline of approximately 4%, year-on-year.
William Kiema, an official at the Association of Kenya Insurers (AKI), also commented; “For an insurance company to re-insure marine cargo, the risk must be too big for it to insure it alone. Marine cargo insurance has had a very slow uptake and reinsurance companies are yet to have its benefits spill over to them so far.”
A report released by the Insurance Regulatory Authority (IRA) of Kenya on the performance of the region’s reinsurance industry in 2016 shows that business is declining, and urges reinsurers to think more broadly and innovate in order to survive.
With the market already being challenging for local players, it’s clear that industry participants feel the new marine law does little to support the country’s reinsurance industry, suggesting that it mainly favours local insurance companies.