Maritime voyages carry significant risks, with cargo shipments often facing threats like damage, loss, accidents, or natural disasters. These risks can lead to substantial financial losses for traders. To mitigate such dangers, various parties play a role in safeguarding ships and cargo, with insurance being a key factor in managing potential risks.
Back home, to manage these risks, our importers have been securing marine insurance from foreign insurers, using the Cost Insurance Freight (CIF) arrangement from foreign insurers. However, there was a general outcry and discontent from the traders indicating that they are challenged with insuring their cargo with foreign insurers as it was associated with delays in claim settlements, high costs of pursuing claims, uncertainty over whether the foreign seller had actually insured their goods, unclear coverage details, and language barriers, among other.
From the Inter Government Standing Committee on Shipping (ISCOS) report of 2015 between 2009 and 2013, government had lost revenue worth Ugx.60.3bnas Value Added Tax and Ugx.35bn as stamp duty through insurance of imports by foreign insurers. With the increased imports over the years, more revenue has been lost.
This, coupled with the significant outflow of insurance premiums and widespread complaints from importers and the business community and in response to their concerns, the Minister of Finance, Planning and Economic Development, Hon. Matia Kasaija, directed the Insurance Regulatory Authority (IRA) to work with the Uganda Revenue Authority (URA) to put in place administrative measures ensuring that goods imported from other countries are insured by locally licensed insurance companies, in order to enforce and implement the provisions of the Insurance Act.
The directive led to a series of discussions involving key stakeholders, including the Ministry of Finance, Planning and Economic Development, Ministry of Foreign Affairs, Uganda Revenue Authority, Uganda Insurers Association, Intergovernmental Standing Committee on Shipping, Private Sector Foundation Uganda, Uganda Manufacturers Association, Kampala City Traders’ Association, Uganda Shippers’ Council, Uganda Clearing Industry and Forwarding Association, Uganda Cargo Consolidators Association, Uganda Freight Forwarders Association, Federation of Uganda Customs Agents and Freight Forwarders, Used Car Dealers Association and Authorized Economic Operators.
On November 6, 2024, the IRA, the Uganda Insurers Association, in partnership with Uganda Revenue Authority officially launched the integrated online platform for Local Marine Cargo and Goods-in-Transit insurance, an initiative geared towards improving trade facilitation and strengthening the insurance sector.
The online platform will ensure that a locally licensed insurance company covers the Insurance component in CIF. This means that effectively our domestic importers are required to only get quotations for Cost and Freight from their suppliers, and the Insurance component be acquired and provided by the local insurers via the platform.
This will enable importers to buy insurance in local currency at highly subsidized premium rates, facilitate prompt and efficient claims processing in case of damage or lost goods in transit. Importers will also now have direct access to their insurers, eliminating the complexities of dealing with foreign entities ensuring that businesses recover swiftly and continue their operations with minimal disruption in the unfortunate event of cargo loss or damage. In addition, retaining insurance premiums within our borders will enhance the liquidity of our financial markets and contribute to national revenue.
To implement this, traders have been given a three-months grace period, up to January 31, 2025 to comply and start securing insurance for imports destined in Uganda from locally licensed insurers.
All importers and stakeholders are encouraged to adopt this new approach to doing business, take full advantage of the platform’s benefits to improve efficiency, reduce costs, and support the growth of our local industries. By working together, we can create a resilient and self-sustaining economy that benefits all Ugandans.
Alhaj Kaddunabbi Ibrahim Lubega– CEO IRA Uganda.