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Stakeholders in the logistics industry are questioning the abrupt directive by the Insurance Regulatory Authority (IRA) and the Kenya Revenue Authority (KRA) requiring all imports to be insured locally. They argue that the measures necessary to support such a move have not been put in place and that implementing the directive will end in failure as was the case in 2017 when it was first issued.
To support Kenya’s insurance industry, Section 20 of the Insurance Act prohibits placing “Kenyan Business” with foreign insurers except under specific circumstances. The Treasury attempted to enforce this provision in 2017 but it did not succeed. Now, a new directive mandates that starting 14 February 2025, all importers must digitally procure Marine Cargo Insurance (MCI) from locally licensed companies before customs clearance.
Following the Enactment of the Finance Act, 2017, on 23 June 2017 and the amendments to the Marine Insurance Act CAP 390, Section 16A made it mandatory for any person with an insurable interest in marine cargo to place MCI with an insurer locally licensed under the Insurance Act CAP 487 of the Laws of Kenya.
“To ensure full compliance with the indicated legal provisions, the public is hereby notified that effective 14th February 2025, all importers shall be required to digitally procure Marine Cargo Insurance cover for their imports from locally licensed insurance companies per the above statutes, before obtaining custom clearance,” the KRA and IRA notice reads in part.
In line with this, all importers must digitally procure Marine Cargo Insurance coverage from locally licensed insurance companies before obtaining customs clearance. KRA Commissioner of Customs and Border Control has now distanced the authority from the controversial directive saying its mandate is to assist other government agencies in the implementation of the law due to the position and role it plays in the management of imports. KRA was enjoined in the public notice, the commissioner said, as the focal point of imports and to transmit information to importers for the management by IRA. Efforts to get information on the industry players’ concerns from the IRA were unsuccessful since the Commissioner, the only person authorised to address the press, was said to be away.
Industry stakeholders say it is unclear why an industry regulator would be allowed to transact business in an industry it is supposed to regulate without there being a conflict of interest. All the industry stakeholders now complain that they were not engaged or sensitised before the directive was issued.
The industry recorded a significant increase in 2017, with MCI uptake increasing by 36 per cent from KSh2.5 billion in 2016 to KSh3.4 billion in 2017. It also recorded a 32 per cent increase from KSh2.5 billion in 2016 to KSh3.3 billion in 2018.
This was way too low compared to the KSh20 billion target. According to the Kenya Trade Network Agency (KenTrade), which operates the online cargo clearing system, uptake has since declined steadily due to a lack of enforcement and delayed integration between the industry stakeholders involved in Marine Cargo Insurance.
It is not yet clear why the processing of the MCI is not being undertaken by KenTrade. The agency was part of a task force that was directed to come up with a solution for digitising MCI. The task force agreed that KenTrade would facilitate the processing of MCI covers by allowing importers and exporters to submit MCI requests to insurance companies through the National Electronic Single Window System (NESWS) that is managed by the agency.
KenTrade said that all insurance companies have been onboarded to the system. However, the insurance module had not yet been activated because of outstanding issues such as the role of insurance brokers and whether they should also be onboarded. The KenTrade system has been fully linked to the KRA’s Integrated Customs Management System (iCMS), which replaced the Simba System.
Under the current arrangement, Safaricom – Kenya’s leading telecommunications company – is supposed to facilitate the procurement of digital MCI. In collaboration with the IRA and KRA, the two agencies that issued the February notice, Safaricom has integrated the Coral Marine Cargo Insurance Mini App into its M-Pesa Super App. This integration enables importers to obtain MCI certificates.
The process begins with importers obtaining an active Import Declaration Form (IDF). They can then access the Coral Mini App via the M-Pesa Super App to retrieve or input their IDF number, which auto-populates the necessary cargo details. After completing the required information and paying the premiums, the system generates a digital MCI certificate. This certificate is electronically submitted to the IRA platform and forwarded to KRA’s Integrated Customs Management System (ICMS).
Recently, seven private sector organisations jointly submitted a memorandum seeking the suspension of the mandatory requirement for local marine cargo insurance until critical concerns are addressed. The memorandum, signed by the Kenya Transporters Association (KTA), Shippers Council of East Africa (SCEA), Kenya Private Sector Alliance (KEPSA), Kenya International Freight and Warehousing Association (KIFWA), Kenya Association of Manufacturers (KAM), Kenya National Chamber of Commerce and Industry (KNCCI), and Kenya Ships Agents Association (KSAA), outlines several pressing issues affecting stakeholders. The memorandum was signed by all the organisations’ chief executives.
Key issues highlighted in the memorandum include the need for clear exemption guidelines, detailed implementation procedures, and broader stakeholder engagement. The organisations argue that without addressing these concerns, the directive could increase trade costs, reduce Kenya’s global competitiveness, and hamper the country’s industrialisation agenda.
“This request is based on our analysis of the significant impact the directive will have on the private sector if unaddressed, which includes adversely affecting trade, increasing the cost of doing business and hindering Kenya’s industrialisation agenda,” reads the memorandum in part.
A primary concern is that global trade practices rely on International Commercial Terms (Incoterms), which define terms of sale between suppliers and importers. In many cases, in credit-based transactions, suppliers retain ownership of the insurance interest until certain conditions are met. The new requirement could complicate these arrangements, introducing legal and financial uncertainties.
“International trade is based on globally accepted terms that are negotiated between suppliers and importers,” the memorandum further explains.
The memorandum also points out a lack of clarity as to how the directive will be integrated with the KRA iCMS and the KenTrade Single Window System. While Section 16A allows for exemptions, the process for obtaining them remains opaque and largely inaccessible to stakeholders.
“We request on behalf of our members for the suspension of the implementation of the local MCI pending clear exemptions for specific situations such as goods insured under Cost Insurance Freight (CIF), contract manufacturing, and high-value shipments.”
During recent stakeholder engagements in Nairobi and Mombasa, representatives from KIFWA acknowledged the sector’s unpreparedness. A joint statement by KIFWA, KEPSA, and the Federation of East African Freight Forwarders Associations (FEAFFA) emphasised the need to defer the rollout, citing unresolved regulatory questions, inadequate awareness, and digital infrastructure limitations.
“It is in this regard that we kindly request the deferment of the rollout of this programme to allow for more stakeholder engagement and awareness creation among all industry players. We also request for a pilot rollout followed by a phased implementation,” a letter signed by KIFWA outgoing Chairman Roy Mwanthi and addressed to the Commissioner of Customs and Border Control at KRA, stated.
Clifford Ochieng, founder, chairperson, and president of the Association of Kenya Professional Insurance Agents (AKPIA) and the Pan-African Insurance Agents Association (PAIAA), noted that the directive is projected to generate KSh70 billion in premiums annually. However, because it has not been fully implemented, importers to continue to source insurance from foreign underwriters, depriving local insurers of business.
“The new directive has not addressed imports without Import Declaration Form (IDF) numbers, which will pose a challenge to importers,” the AKPIA Chairperson stated.
While stakeholders support the enforcement of the Marine Cargo Insurance law, they stress the importance of creating a level playing field. Concerns have been raised about potential monopolisation by a single underwriter, which could stifle competition. The Association of Insurance Brokers of Kenya (AIBK) expressed disappointment at being excluded from discussions, according to its Chairman Anthony Mwangi.
Industry estimates suggest that full implementation of the directive could boost the insurance business in premiums annually. However, achieving this potential requires extensive stakeholders’ education, structured implementation, and robust digital infrastructure.
However, making local MCI mandatory could conflict with the East African Community Customs Management Act (EACCMA). Paragraph 9(2)(c) of EACCMA’s Fourth Schedule allows for insurance costs to be added to the customs value or defaulted to 1 per cent of the cost of goods and freight if the actual insurance cost is unavailable. The SCEA argues that enforcing local insurance procurement undermines the importer’s right to choose their coverage provider and contradicts existing trade practices.
“We hope the Commissioner of Insurance will provide clear guidance and reinforce the provisions allowing for exemptions from mandatory local insurance. This includes addressing concerns related to global insurance coverage for shipments, supplier-initiated insurance for raw materials, and the importers’ right to choose whether to insure or not. Furthermore, shippers seek assurance that local insurance options will be competitive and that the industry can handle such coverage effectively,” said the Chief Executive Officer of SCEA Mr. Agayo Ogambi.
Additionally, KIFWA highlights that international trade often involves contracts where insurance is bundled under Cost, Insurance, and Freight (CIF) or Carriage and Insurance Paid To (CIP) terms. KIFWA suggests that local MCI should apply only to shipments under Free on Board (FOB) or similar terms, where insurance is not inherently included.
“As discussions around MCI continue, we urge the relevant authorities to consider these issues and ensure that any implementation framework benefits all stakeholders in the logistics and trade sectors,” Mwanthi said.
Beyond industry opposition, the new system raises practical concerns. KIFWA questions how the MCI will apply to IDFs that are cancelled before entry submission. Similarly, uncertainty surrounds exemptions for shipments under government-to-government projects, humanitarian relief efforts, and credit-based imports where suppliers retain insurable interest.
Kenya’s MCI has failed to meet its target due to several challenges. This includes gaps and inconsistencies in regulations that make enforcement difficult, allowing importers to bypass local insurers, and resistance from many who prefer foreign insurers, citing better rates, wider coverage, and ease of claims processing.
Some importers are unaware of the benefits and legal requirements of purchasing MCI locally while perceived inefficiencies of local insurers, concerns over slow claims processing, and lack of competitiveness among Kenyan insurers discourage compliance. Many international suppliers bundle insurance with freight, making it convenient for importers to stick with foreign insurers.
The debate over the mandatory enforcement of MCI in Kenya highlights the complex intersection of regulatory intent, industry preparedness, and global trade realities. While the directive aims to boost local insurance uptake and retain premiums within the country, stakeholders argue that its rushed implementation, lack of engagement, and digital integration challenges could disrupt trade and increase costs for importers.
Calls for its suspension by key industry players underscore the need for a more structured approach. As discussions continue, industry players remain hopeful that regulatory authorities will reconsider their approach, ensuring that any enforcement of the MCI requirement is both practical and beneficial to all stakeholders in Kenya’s logistics and trade ecosystem.
