Ladies inspect cars at a bond in Kampala recently. All imports into Uganda must be insured through local insurers, a move aimed at boosting insurance uptake, retaining revenue within the country, and enhancing economic growth. PHOTO/FILE
All importing vehicles will not be allowed to enter Uganda beginning early next year unless their shipments—no matter the kind of cargo—are fully insured by local insurance companies, Business Outlook has learnt.
Starting February 1, 2025, all importers in Uganda will be required to insure their cargo through local Ugandan insurance companies, a move that will not only generate some revenue for the government but also deepen insurance uptake. The latter is currently below one percent penetration.
Those who fail to comply when caught will face a penalty equivalent to one percent of the insured goods' value, which is significantly higher than the typical 0.3 percent charged by local insurers. This change follows concerns raised by the Intergovernmental Standing Committee on Shipping (ISCOS), which highlighted that Uganda lost over Shs60.3 billion in value added tax or VAT and Shs35 billion in stamp duty between 2009 and 2013 due to absence of local insurers’ involvement in handling of imports.
As imports continue to rise, local insurers are now stepping up efforts to inform businesses about the benefits. It is for this reason that online marine insurance went live after 10 years since inception, this time to facilitate the uptake of local marine insurance.
Impact, motivation
With mandatory local marine insurance set to take effect in just two months, industry players across board believe it will change insurance and shipping landscape into a more viable economic sector in terms of job creation and revenue generation. According to Chairman of the Uganda Shippers Council, Mr Charles Kareeba, if enforced to the letter, the policy will have a positive impact on the freight and cargo industry.
In an interview, Mr Kareeba, noted that the birth of the policy became a reality after the bad hand that local industry professionals have been dealt became more pronounced.
“We realised that the same people selling goods were also the ones negotiating insurance, which resulted in unnecessary expenses,” he said.
Adding: “When we look at the data then, we noticed that between 2007 and 2011, East African countries—Kenya, Uganda, and Tanzania—spent $2.98 billion on insurance alone. Imagine if that money had been invested in local insurers in the region, it could have significantly boosted regional growth. Recognising this, the Intergovernmental Standing Committee on Shipping decided to encourage East Africans to use local insurance companies for their cargo.”
Mr Kareeba, alongside the Kenya,Tanzania and Zanzibar Shippers Councils, embarked on sensitisation of local importers with a view to stop “donating” or the outflow of funds abroad and instead work to retain it within our regional economies. Kenya, perhaps unsurprisingly, swiftly adopted the policy, turning it into an Act of Parliament. Uganda is also in the process of making it law.
No option
Under this new policy, importers will no longer have the option to choose foreign insurers at the expense of local industry players. The task now is to change the mindset of traders, majority of whom are importers, to transition into the new way of doing business. To this effect workshops to educate traders about the importance of using local marine insurance is underway.
It also emerged during the interview with Mr Kareeba, an experienced shipper, that lack of accountability, a rampant challenge associated with international insurance will be reduced if not eliminated once enforcement of this policy takes shape.
“For example, if you insure with a Chinese company called Lee, the first thing you have to deal with is the fact that there are millions of 'Lees' out there. So If your goods are lost, stolen, or damaged—whether through fire or theft—there’s often no clear person to address your claims to, creating a huge risk for importers,” Mr Kareeba said.
“Additionally, fraud is another concern. Some policies, like 'All Risks' insurance, claim to cover everything, but in reality, there are limits. For example, one policy might cover only 12 specific risks, and another only six, but both may be marketed as 'All Risks.' The importer ends up paying for comprehensive coverage but only gets partial protection,” he added.
On capacity
Already there have been concerns raised regarding the capacity of local insurers to come clean on their side of the bargain. Industry players recognise this. For now, though, they are asking for the professional trust from the importers, with the buffer being the Insurance Regulatory Authority of Uganda as the adjudicator in case of breach from the service providers .
According to Mr John Bukenya, a member of the Non-Life Technical Committee at Uganda Insurance Association (UIA), whichever way the importers look at it they are much safer and better protected by the local providers. Like Mr Kareeba, Mr Bukenya believes compulsory local marine insurance will bring substantial benefits to Uganda’s economy by way of retaining wealth internally. He explained that when importers are compensated for losses, it boosts trust in Uganda’s insurance industry. He also emphasised that the economy can’t grow without insurance, as any loss or damage to goods is a leakage.
“If goods worth Shs100 billion are lost annually, insuring them would prevent that loss and promote economic stability. Local marine insurance will help block these leakages and drive economic growth by increasing insurance penetration,” he said.
Baby steps
The industry has formed a consortium where insurers share risks equally, allowing them to handle large claims efficiently. Companies like Jubilee Allianz, Sanlam, UAP, and Britam have substantial capacities, each covering at least Shs30 billion per risk, with the entire market collectively exceeding Shs300 billion in capacity, according to UIA.
This ensures there is enough coverage for all imports. The Insurance Regulatory Authority of Uganda also ensures all licensed insurers have the necessary capacity. And for that Mr Bukenya predicts that marine insurance will become one of the fastest growing types of insurance in Uganda within a matter of years.
With the compulsory policy and claim payments, more businesses and individuals will—Mr Bukenya forecasts—adopt it. Early signs of growth are already evident, and the industry is gearing up for a significant increase in uptake in the coming years.
