Why the local digital cargo insurance mandate is good for Kenya

Kenyan importers are set to pay significantly less for marine insurance under the national rollout of the Digital Marine Cargo Insurance (DMCI) platform, which takes effect today, July 1.

The directive mandates that all imported cargo be insured locally through the new digital system, replacing previous structures where importers often sourced cover externally.

The change is expected to benefit traders and consumers by reducing overall landed costs and simplifying dispute resolution, including minor claims such as missing vehicle components during shipment.

Kenya International Freight and Warehousing Association (KIFWA) National Chairman Fredrick Aloo said the reform is the result of over a year of consultations between industry players and government agencies, designed to streamline cargo insurance and reduce inefficiencies in the logistics sector.

Speaking during the unveiling of the platform in Nairobi, Aloo gave a detailed comparison of how importers will now benefit under the DMCI structure compared to previous systems, particularly using a motor vehicle import scenario to illustrate the cost impact.

He explained that for a vehicle valued at Sh20 million, import duty is typically calculated using a combined structure of taxes, including 25 per cent import duty, 16 per cent VAT-related charges and 20 per cent excise duty, amounting to a total tax exposure of about 61 per cent of the cargo value.

Under previous arrangements, importers who lacked marine insurance were exposed to a 1.5 per cent surcharge system, equivalent to a Sh300,000 insurance premium, which increased the taxable base and raised overall import costs.

In contrast, the new DMCI structure significantly lowers this burden.

With the digital system, marine insurance is charged at approximately 0.15 per cent of cargo value, according to Aloo, meaning the same Sh20 million vehicle attracts about Sh30,000 in insurance premium.

Aloo noted that this amount is not only lower than the previous surcharge model but also provides structured indemnity protection for importers.

He further explained that these changes how customs valuation is computed, since insured cargo provides a verified basis for cost, insurance and freight calculations, reducing inflated duty assessments that previously increased landing costs.

Aloo also highlighted the practical benefits for traders dealing with partial losses during transit.

“One of the things that we came to realise is that some of us might not critically understand the duty within our own hands, some parts get missing, a mirror in the vehicle, a spare wheel, some manhandled components,” he said.

He noted that such claims, which previously created delays and disputes between importers, insurers and clearing agents, will now be processed more efficiently through the digital system, allowing faster settlement of small but frequent losses.

The DMCI platform integrates customs systems, digital payment channels and insurance verification tools, reducing manual processes and improving transparency in cargo clearance.

Other industry stakeholders argue that the reform is expected to do more than lower import costs and improve port efficiency, with wider ripple effects across the economy.

By reducing the cost of doing business, speeding up cargo clearance, and improving transparency in trade processes, the system is expected to enhance Kenya’s competitiveness as a regional logistics hub.

Ultimately, the changes are likely to filter through to consumers in the form of more stable prices while also strengthening overall economic activity through improved trade flows and investor confidence in the country’s import and supply chain systems.