The Association of Kenya Insurers (AKI) has announced plans to develop an independent customs bonds verification platform in partnership with the Insurance Regulatory Authority (IRA), following a dispute with Kenswitch Limited over service fees.
Kenswitch, a company onboarded by the Kenya Revenue Authority (KRA) in 2018 to provide a platform for submitting original hard copies of customs bonds, recently introduced a 0.125% fee on the value of the bonds after initially offering the service for free. This fee was deemed “outrageous” by insurers, who earn only 0.1% of the bond value as their premium for assuming the risk of default on duties, taxes, and fees.
In response to the fallout, AKI Chief Executive Tom Gichuhi stated in an interview, “We are no longer going to use the Kenswitch platform. We are going back to the manual process, and the verification of the bond is going to be done by insurance companies with staff from the IRA just to give KRA the confidence that the process of verification that we had to use the Kenswitch platform is now, for the time being, going to be carried out by staff at IRA as we develop our own platform as insurance companies in conjunction with the insurance regulatory authority.”
The proposed independent platform aims to replace the Kenswitch platform and allow members to verify customs bonds without incurring additional fees. Gichuhi emphasized that the development of the new platform will take some time, and in the interim, a manual verification system will be used.
The custom bonds insurance policy serves as a surety to KRA, ensuring that insurers will be held liable for all duties, taxes, fees, and penalties connected with the goods if importing firms default on payment. KRA clears cargo only after receiving evidence of insurance-backed bonds, making the verification process crucial for the smooth operation of the import-export sector in Kenya.