Starting February 1, 2025, Uganda will enforce a policy requiring all imported cargo to be insured by local insurance companies. This regulation applies to all shipments, regardless of their nature, and aims to boost local insurance penetration and generate revenue for the government. Currently, insurance penetration in Uganda stands at less than one percent.
Importers who fail to comply with the new mandate will face a penalty of one percent of the insured goods’ value. This fine is notably higher than the standard 0.3 percent fee charged by local insurers. The move comes after the Intergovernmental Standing Committee on Shipping (ISCOS) revealed that Uganda lost over UGX 60.3 billion in VAT and UGX 35 billion in stamp duty between 2009 and 2013 due to the absence of local insurers in handling imports.
The introduction of mandatory local marine insurance is expected to transform Uganda’s shipping and insurance sectors, creating jobs and fostering economic growth. Mr. Charles Kareeba, Chairman of the Uganda Shippers Council, emphasized that the policy could revolutionize the freight industry if implemented effectively.
“The absence of local insurers led to unnecessary expenses and outflows of funds,” Kareeba explained. He highlighted that between 2007 and 2011, East African countries spent $2.98 billion on insurance purchased abroad. Investing such sums in local insurers could have significantly boosted regional economies.
In collaboration with shippers’ councils from Kenya, Tanzania, and Zanzibar, Uganda has been working to sensitize importers on the benefits of using local insurers. Kenya has already enshrined a similar policy in law, and Uganda is now catching up.
While some traders may initially resist the change, workshops are underway to educate them on the benefits of local marine insurance. According to Mr. Kareeba, using local insurers eliminates accountability issues often associated with foreign companies.
“For instance, when dealing with an overseas insurer, claim processes can be complex and untraceable. Fraudulent claims and misleading policies, like incomplete ‘All Risks’ coverage, exacerbate these challenges,” Kareeba noted.
Concerns about the ability of Ugandan insurers to meet obligations are being addressed through a risk-sharing consortium of local companies, including Jubilee Allianz, Sanlam, UAP, and Britam. Collectively, they have a capacity exceeding UGX 300 billion, ensuring sufficient coverage for all imports.
The Insurance Regulatory Authority of Uganda (IRA) is also playing a pivotal role in enforcing compliance and adjudicating disputes between insurers and importers.
Mr. John Bukenya, a member of the Non-Life Technical Committee at the Uganda Insurance Association (UIA), underscored the broader economic benefits. “Insurance prevents economic leakages caused by losses and fosters trust in the industry,” he said.
With this policy, Uganda’s marine insurance sector is poised for rapid growth. Early signs of increased uptake are already visible, and industry leaders predict that mandatory local insurance will lead to significant economic stability and growth.
As implementation begins, the local insurance market is gearing up for a new chapter of resilience and opportunity.
