Ugandan insurers irked by oil and gas companies' denial of marine insurance

The insurers singled out the four drilling rigs that have been shipped into the country, saying they did not abide by the Compulsory Local Purchase of Marine Insurance as per the Insurance Act.

According to the Uganda Clearing Industry and Forwarding Association, UCIFA, each rig was worth $90 million in insurance which would have boosted the local industry's big business.

Jaffer Abdallah Farjallah, the Chairman of UCIFA, told the media in Kampala that the law is also relaxed about refined petroleum imports insuring with local insurers.

Delay in implementing local marine insurance

It has been six years since the regulations on compulsory local marine insurance were made to ensure that Uganda claims money from insuring imports. But it wasn't until last year that the Insurance Regulatory Authority announced that enforcement would begin in June.

One of the hindrances includes the 1.5 percent fine on cargo for its value by Uganda Revenue Authority.

Farjallah says the fine has bottle-necked insurance earnings because if imports were only subjected to 0.5 percent pay to local insurers, it would boost taxes payable beyond estimated earnings from the 1.5 percent increase.

Addressing queries about oil imports, the Manager of Inspections at the Insurance Regulatory Authority, Stephen Kaddu Mukasa said Marine Insurance is new in the country which comes with challenges. He, however, dismissed claims that the oil and gas equipment shipped into the country was insured with foreign companies.

Challenges in insuring oil and gas equipment

The Petroleum Authority of Uganda also said local companies may lack the capacity to provide insurance for such equipment due to their nature, the risks involved, and where they originate.

It is alleged that one rig would have increased total premiums in the local insurance industry by over 30 percent after said premiums hit the one trillion shillings mark last year.

Way forward

On its part, the traders association KACITA Uganda, says it is ready to embrace marine insurance as soon as enforcers implement it. In one instance, Jemba Kanakulya Mulondo, a board member of Kacita and logistics operator, said the IRA should engage with China to reach an agreement on marine insurance.

In January this year, URA and Uganda Investment Authority gave importers three months to purchase local marine insurance. During this period, importers will not face penalties for not being locally insured for marine imports.

According to Ibrahim Bbosa, the Assistant Commissioner for Public and Corporate Affairs at URA, during this period, importers with foreign marine insurance coverage will be facilitated.