Insurance

Insecurity: Insurance Firms Impose N2.3trn Premium On Nigeria-bound Ships

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BABALOLA YUSUF, ZAKA KHALIQ

Foreign and local ship owners as well as charterers entering Nigeria’s territorial and coastal waters are paying a whopping N2.3 trillion every year to foreign insurance companies to insure their ships against any attacks, LEADERSHIP has exclusively gathered.

Findings revealed that each of the 5,000 vessels calling at the nation’s ports are made to pay $100,000 annually (totalling N2.3trillion) as insurance premium, tagged ‘War Risk’.

However, stakeholders in Nigeria’s shipping industry have frowned at the description of the country as a war zone, hence the war risk premium, saying it is a misnomer as the country is not in a war situation.

In insurance parlance, war risk insurance is a type of insurance which covers damage due to acts of war, including invasion, insurrection, rebellion and hijacking. War risk insurance generally has two components: War Risk Liability, which covers people and items inside the craft and is calculated based on the indemnity amount; and War Risk Hull, which covers the craft itself and is calculated based on the value of the craft. The premium varies based on the expected stability of the countries to which the vessel will travel.

Sources in the insurance industry told LEADERSHIP that the ship owners are made to pay the premium not because the country is fighting a war, but because of the militancy in the South-South region and the activities of Boko Haram terrorists in the North East.

However, some insurance experts have said that with the cost of replacing a damaged vessel, which runs into billions of naira, this charge is considerate, taking into consideration the current economic realities.

Currently, only few local insurance companies have the needed capacity to underwrite marine risks; hence, most marine insurances, especially ship insurances, are always ceded abroad. In some cases, however, this business is shared between the local and foreign insurers, although their foreign counterparts retain the highest risks and premiums.

Also, as a result of the low capacity of most underwriters in the country, findings show that the nation’s insurance industry is losing about N2 trillion on a yearly basis to these foreign insurers. At present, the total premium income of the insurance industry is still around N300 billion.

Industry watchers believe if the insurance industry can retain most of the N2 trillion available in the industry, it would have the capacity to contribute meaningfully to the country’s GDP and economic development.

Speaking on this development, a former executive secretary/ chief executive officer, Nigerian Shippers’ Council (NSC), Capt. Adamu Biu, pointed out that tagging ships coming to Nigeria as being at war risk when the country is not in a war situation, is a serious embarrassment and could cause inflation in the country.

He, however, acknowledged that the threat to life and property is a serious challenge to any industry.

“The security of our waterways is a phenomenon that must be addressed decisively and urgently if foreign participation is to be expected in our shipping industry.

“Presently, ship owners and charterers are made to pay insurance premium of up to $100,000 per vessel’s call to any Nigerian port. It is called War Risk. This is a serious embarrassment to the nation as we are not at war. It also adds to inflation in the country as the ship owners simply find a way to pass this bill to the cargo interest,’’ he said.

A former ship captain and former president of the National Association of Merchant Navy and Water Transport Senior Staff Association, Thomas Kemewerigha, described the South-South as a notorious region and called for proper policing of the water channels.

He further noted that the fear of kidnapping had chased away local fishing trawlers and other seafarers, and urged the Navy to rise up to its duties.

“Now that seafarers are scared to venture into Nigerian wa­ters, the economy is affected and jobs are lost regularly. Revenues accruable to the government are reduced because import is also reduced. The multiplier effect is much,” he said.

Maritime experts also said the notoriety of Nigeria’s waters spells doom for the country which, if left unchecked, may compel international maritime organisations to label Nigeria a war risk or high risk nation despite the fact that there is no war in the country.

The direct effect of this is the astronomical increase in cost of imports because fewer vessels will have the cour­age to come and their calling at any Nigerian port, especially in the South-South region, will come with huge fees.

Analysts also say the development would hurt the nation’s economy be­cause reduced imports without match­ing local production would be detrimental to an import-dependent economy like Nigeria.

Leadership

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