VAT – The Big Question

At the end of September 2023, I published an article on the insurance implications of the new VAT rules introduced in July this year under the new Finance Act. The link is below, but fundamentally, it was to warn everyone that we did not know the full implications and that we were waiting on our insurer partners to give us some clarity.

Please click here.

Out of the 7 insurers that we approached, not one has given us any feedback, suggesting that either, they do not have an answer, or they are afraid to be the first one to ‘come out’ and make an announcement. To their credit, APA Insurance, had already sent a notice out advising all policyholders to increase their sums insured by 16% (VAT), but they made no confirmation that all claims payable would include the VAT element, so it was still unclear.

Today, we have heard from one major insurer, and this is what they have said:

Our current position is that; where a claim involves assets that have VAT, we will on insured’s request include the same in our compensation provided the insured will provide proof of input tax deduction and subject to adequacy of sum insured’.

In more simple terms, they are stating that they will include VAT for all claims payments, as long as you can provide evidence of your VAT status. That is good news, however, as you can see, they say that ‘subject to your sum insured being adequate’, so that means you ‘should’ be increasing your sums insured by 16% if you have not already done so. Of course, that means an increase in your asset insurance premiums! A word of warning here…if you do not review your sums insured and there is a small loss, I imagine you will be fine…if you have a major one, you could be faced with a major underinsurance issue.

One final point: It seems this subject is still being discussed at a very high level, with cases in the High and Supreme Courts, and industry associations such as the Association of Kenyan Insurers, Insurance Regulatory Authority, etc., so there could be developments going forwards. The problem is, of course, if you have a major loss before this is resolved, you could be prejudiced.

If you have any questions on the above, please reach out to Jeremy on

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