Government’s plan to domesticate marine insurance gets nod

THE insurance industry has commended the Government’s proposed adoption of legislation to domesticate marine insurance business in a move meant to enhance the growth of the local insurance industry.

Freight forwarders are a critical sector in Zimbabwe’s landlocked economy as they provide an important link in the supply chain of goods and also facilitate international trade.African safaris

Zimbabwe participates in the export and import of commodities, which involves marine insurance for the conveyance of cargo over land, water and air.
Marine insurance helps to cover loss and damage to ships, cargo, terminals, pipelines, ports, oil rigs and platforms, and similar property.

Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, recently highlighted that no law mandates local importers and exporters to make use of local insurance for all marine insurance.

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Professor Mthuli Ncube

He pointed out that the dominance of foreign insurers deprives the growth of the domestic insurance sector and leads to the externalisation of premiums, consequently depleting Zimbabwe’s foreign exchange reserves.

Hence the Government has proposed the adoption of legislation to domesticate marine insurance.

In an interview, Insurance Council of Zimbabwe research analyst, Mr Kundai Jonga, noted that the dominance of offshore insurers stems mainly from the logistics cycle, where insurance and freight are included in the cost of the product.

“The insurance industry applauds the Government’s proposed legislation to domesticate marine insurance business as this would greatly enhance the growth of the local insurance industry and spearhead insurance penetration, as well as retain insurance premiums within Zimbabwe which positively contribute to the development of the local economy,” he said.

Mr Jonga noted that the direct economic impact would be an increase in revenue for local insurers, which in turn will boost the financial capacity of the sector and foster product diversification in a bid to cater to this market.

He further said that the legislation could unlock a substantial new market for domestic insurers, potentially leading to significant revenue growth and expansion of product portfolios.

“In addition, the retention of forex premiums locally will help in lessening the burden on the balance of payments as there is less externalisation of valuable foreign currency,” said Mr Jonga.

He noted that the biggest consideration would be that most importers and exporters have a bias towards offshore insurers whom they perceive to be reliable, have global reach, competitive pricing, and established relationships.

“These insurers are often integrated into the logistics cycle, as insurance and freight costs are embedded in product prices. For instance, exporters from the country of origin frequently choose to insure goods locally to simplify claims processing in their jurisdictions,” he said.African safaris

Mr Jonga highlighted that to overcome existing biases, local insurers must establish strong relationships and partnerships with importers, exporters, and international stakeholders.

He noted that they must demonstrate value by providing competitive pricing, offering comprehensive coverage tailored to market needs, and seamlessly integrating into the logistical cycles of their clients.

“Building trust and demonstrating reliability will be critical for local insurers to compete effectively with established foreign players,” he said.

Mr Jonga, however, said the legislation may have implications for Zimbabwe’s bilateral trade agreements, as it could be viewed as a barrier by trading partners.
He pointed out that a collaborative approach between the Government, trade partners, the Insurance and Pensions Commission (Ipec), and industry stakeholders is essential to ensure the legislation is practical, enforceable, and mutually beneficial.

Accordingly, he said the domestication of marine insurance has the potential to significantly boost the local insurance industry and the broader economy.
However, for the legislation to succeed, local insurers must address key challenges, such as building trust, offering competitive products, and integrating into global logistics cycles.

Collaboration among stakeholders, including Government and trade partners, will be essential to minimise disruptions and ensure the policy benefits all parties involved.-chroncile