Kenyan insurers benefit greatly from Treasury budget proposals
Source: Middle East Insurance Review | Jul 2016
Insurers have emerged as the big winners in the proposed guidelines highlighted by Treasury Cabinet Secretary Henry Rotich in the national budget, granting them a slice of the KES1.6 trillion (US$15.8 billion) worth of imports into the country.
Under the proposals, local insurance firms will be allowed to insure inbound cargo. “It is huge business worth about KES20 billion in premiums that has been unlocked for our members,” said Mr Tom Gichuhi, Chief Executive of the Association of Kenya Insurers (AKI).
Every motor vehicle imported into Kenya gets a one off premium of at least KES5,000 that is loaded onto the landed price that is paid by the importer. But the buyers of such vehicles have no guarantee that the insurance has actually been paid for, Mr Gichuhi noted.
Nearly 110,000 vehicles including trucks and buses were imported in 2015, translating to over KES550 million worth of premiums paid to foreign insurers on that class of imports alone. The premiums would certainly be much higher when all other categories of more valuable imports are included.
Petroleum products worth KES215 billion and machinery with an estimated value of KES212 billion made up the top two imports, according to official statistics, indicating the size of potential market for local firms.
“It is something we have been fighting for the many years,” Mr Gichuhi said. A total of 46 insurance firms operate in Kenya, where at least half of them, including Britam, GA Insurance and Kenindia already offering marine cargo policies.
Collectively, the firms collected KES2.9 billion worth of premiums from the marine segment in 2015 – before paying out just over KES600 million worth of claims. Currently most of the revenues earned by the local insurers are from domestic exports, including coffee and tea.
KES1 = US$0.10