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By Steve Agbota, [email protected]
For many years running, those operating in the Nigerian maritime space have borne the burden of war risk insurance, a consequence of the region’s piracy and security challenges.
Foreign insurance firms, in a bid to play safe, have peppered Nigerian maritime operators with scathing charges.
This escalating trend of premium hikes has had a detrimental impact on the cost-effectiveness of maritime trade in Nigeria.
War risk insurance is an insurance policy that provides financial protection to the policyholder against losses from events such as invasions, insurrections, riots, strikes, revolutions, military coups, and terrorism. The premium varies based on the expected stability of the countries to which the vessel will travel.
Daily Sun learnt that Nigeria pays a minimum of $400 million annually to the insurance firms when there has not been any attack on vessels in the last three years.
After carefully looking at the situation, the federal government under former President Muhammadu Buhari, through the Nigerian Maritime Administration and Safety Agency (NIMASA) invested multi-million dollars in maritime security architecture commonly known as the Deep Blue project.
The project is designed to generate an integrated surveillance and response capability that will bring together coastal surveillance, airborne surveillance, command and control centres, and response vessels.
The project will impart a significant uplift to Nigeria’s ability to combat a range of maritime criminal activities including piracy, armed robbery, kidnapping, trafficking of people, smuggling of drugs and other contraband, oil theft, illicit waste dumping, and illegal and unregulated fishing.
Since the Deep Blue project was inaugurated in 2021, it has curbed piracy, sea robbery, sea-kidnapping and other maritime related crimes on the nation’s waters and up to the Gulf of Guinea (GoG).
The improvement earned Nigeria recommendation from International Maritime Organisation (IMO) and International Maritime Bureau (IMB) removed Nigeria from the international list of countries prone to piracy.
Stakeholders who spoke with Daily Sun lamented that despite significant improvements in maritime security, the likes of the Lloyds Insurance Company and others are still slamming war risk surcharge on the vessels and cargoes coming into the nation’s ports.
This premium continues to inflate the cost of freight for Nigerian-bound cargo for both import and export.
As the trend of war risk persists, the Nigerian Maritime Administration and Safety Agency (NIMASA), has vowed to enlist the support of the United Nations (UN) over foreign insurance companies’ continued collection of war risk surcharge on Nigerian bound cargoes despite sharp reduction in piracy and sea robbery on the nation’s water.
At a recent forum, the Director General of NIMASA, Dr. Dayo Mobereola, said NIMASA has initiated discussions with key international partners, including taking the matter to the United Nations.
He hinted that with the backing of the UN and other international stakeholders, Nigeria would be in a stronger position to challenge the insurers, forcing them to adjust the premiums in line with the actual risk.
“We’ve engaged them, and we’re taking it to the United Nations. The UN is going to support us, and we will be able to take it to the insurers who will have no choice but to reduce it as well,” he said.
He also highlighted the need for Nigeria to collaborate with international maritime organisations to tackle the entrenched practices that sustain the war risk premium.
According to him, the war risk surcharge imposed on vessels operating in Nigerian waters still persists due to the influence of a cartel within the international insurance landscape.
According to him, despite the significant improvements in maritime security, the surcharge continues, saying it has inflated the cost of trade for Nigeria, underlining the need for a coordinated international effort to address the issue.
“In all honesty, Nigeria alone cannot do it. We need the international maritime organisations to be with us,” he stated.
He stated further that the war risk surcharge is not determined by the actual risk level but by a cartel profiting from the status quo.
“Despite Nigeria’s concerted efforts to curb piracy and enhance maritime security, the war risk premium has not seen a corresponding decrease. Even if we have zero piracy and no security incidents for the next ten years, if we don’t force the issue, they will continue to charge us,” he said.
He argued that these premiums, which significantly elevate freight costs for imports and exports, are being artificially sustained by insurers who are well aware of the improved security situation but prefer to maintain the high charges to maximise profits.
In an interview with Daily Sun, Charles Okerefe, Managing Director/CEO of Kamany Marine Services Ltd., questioned the continued imposition of high insurance premiums on Nigerian-bound cargoes, despite recent improvements in maritime security.
“Well, the last time I checked, Nigeria still remains a member of the International Maritime Organisation (IMO). As a matter of fact, we are seeking an election into class C. Very good, at the moment. So, the question is, how well have our representatives at the IMO pushed to reverse that trend?
“We have representatives at the International Maritime Organization, which is a leading body for maritime entities around the world. Now, even the former IMO Secretary General, when he came to Nigeria, acknowledged that our waters have become safer than they used to be, especially from the COVID period.
There has been a remarkable improvement. So, it is our representatives at the IMO that should push for the reversal of issues like water insurance.
“We also have the Ministry of the Marine and the Blue Economy. What efforts are they making to reach out to the international shipping community to reverse the trend of charging war risk on vessels and cargoes that are coming to Nigeria? I think it lies within the purview of our representatives at the IMO,” he said.
According to him, also, NIMASA, as in the maritime administration, a body agency in Nigeria to reach out to ship owners, the international shipping community, to make it known that Nigeria does not deserve to be punished, ban cargoes by way of charging them war risk, because actually the nation’s waters are safe now.
“And our ports have improved to a large extent. So, it is where you have issue in the maritime domains that war risk insurance should apply. At the moment, in Nigeria and the Gulf of Guinea region, there has been a lot of quiet.
“So, for now, there should be concerted efforts, not only by the Ministry of the Marine and the Blue Economy, the NPA, NIMASA, but also our representatives at the IMO to push for a reversal of the charging of war risk insurance on our Nigerian-bound cargoes,” he said.
A Nigerian ship owner and the current president of the Nigerian Chamber of Shipping (NCS), Aminu Umar said there is a need to have a lot of engagement with the Lloyds syndicate that is the team that used to bring up the war risk insurance.
Okerefe proposed that NIMASA, in partnership with industry stakeholders, should liaise with the Joint War Committee to advocate for the waiver or retention of war risk insurance for vessels operating in Nigerian waters.
“So, my take is that both NIMASA and the industry should engage to go and have a meeting with them, to be able to showcase why we think the war risk that has been put on vessels that are operating within this zone should now be waived and this zone should be taken out.
And NIMASA will at least showcase what they have put in place to make sure that vessels are fully secured and vessels are going to be very okay. So, I think number one thing is to engage the Joint War Committee.
“Number two is to put together an industry, together with NIMASA, to have that conversation and showcase what are the things that are put in place to make sure ships are very free, and not at risk at all,” he explained.
