Investigation by Shipping Position Daily has revealed real reasons behind the sharp decline in marine and ship insurance in the nation’s maritime sector. This is even as stakeholders have blamed the low volume of capital to finance the insurance of vessels by Nigerian Insurance companies, unlike other maritime countries.
Checks by Shipping Position Daily revealed that Nigeria’s local insurance firms lost about N81.8 billion to their foreign counterpart instead of N37.8 billion as provided by the relevant local content law on oil and gas insurance in 2022.
It will be recalled that the Federal Government had set a target of 70 per cent local content for the underwriting of oil and gas risks, implying that 70 per cent of all insurance risks associated with oil and gas business including prospecting, exploration, drilling, constructions, shipping, distribution, marketing, and transportation, are to be insured in Nigeria with registered Nigerian insurance companies.
The law stipulates that 70 per cent of the total premium on the oil and gas sector insurance should be undertaken by the local insurance firms while their foreign counterparts take 30 per cent.
According to data and statistics from the National Insurance Commission, (NAICOM), while local firms actual underwriting was 35 per cent, which translated to N43.9 billion out of the total N125.7 billion premium, their foreign counterparts took 65 per cent which translated to N81.8 billion.
Details of the 2022 oil and gas insurance show increasing disproportionate underwriting in favour of foreign insurance firms quarter-on-quarter.
Speaking with our correspondent last week, the Chairman Institute of Chartered Ship Brokers (ICS), Dr Chris Ebare lamented that there are really no specialized marine underwriters in Nigeria when compared to other maritime countries.
He also noted that Nigerian insurance companies and banks do not have enough volume of capital to finance the insurance of vessels and cargo, unlike other countries who have specialized Banks with enough volume of capital to finance very big vessels.
Dr Ebare stated that the insurance system in Nigeria is still growing, adding that when it is very critical and necessary for ship owners to get insurance, they are forced to go outside the country to get the insurance due to Nigeria’s insurance policies. According to him, when eventualities and casualties happen to ships, foreign insurance underwriters ensure the insurer is indemnified immediately without even going to court.
The ICS helmsman however noted that the institute in Nigeria is working towards ensuring that critical players especially in the maritime sector would have confidence in the shipowners and vessels so as to institute and establish a very formidable insurance policy for our vessels, crew and cargo.
“In the nation’s maritime sector today, there are really no specialized underwriters like the way they have in other maritime countries. Like the particular sectors in other countries like the HSCE where you can go to the UK or Singapore and see marine insurance underwriters that instil confidence in most of the shipowners’ minds. In case there is any eventuality, the underwriters take care of it.
“If you look at people who are practising insurance in Nigeria, I cannot point categorically at any Bank that does that like other countries. Banks in other countries are bigger than Zenith and UBA banks combined in terms of assets and liabilities that are really undertaking this kind of risk. Their crew, the vessel and others are always insured. I know one of these days in the Nigeria maritime sector, we would grow up to that extent.
“Yes, I agree that many banks are turning down the maritime industry due to the risk involved. Most of the Nigerian banks cannot handle the finance of a vessel. They don’t have the resources to handle and underwrite insurance like what we see in other IMO countries like China, and Norway which have modern vessels. I am not surprised that they have turned down the maritime industry. In other countries, they have specialized banks which have enough volume of capital to finance very big vessels. Such vessels are insured. When eventualities and casualties happen to the ships, such an underwriter will come over and ensure the insurer is indemnified immediately without going to court.
“Nigeria banks don’t have such capital. Most of them shy away from it and we cannot really blame them. If you look at our country, insurance practice has not really grown, compared to other countries. Presently, I think our insurance companies are the ones that are taking the various policies and when it is very critical and there is a necessity, some of the vessel owners go outside the country to get the insurance policy. Like I said, the Maritime industry is still growing to be able to have a formidable policy they can rely on in case of any incident involving any cargo, ship or crew” Ebare concluded.
Reacting to the allegation of a lack of specialised insurance brokers in the maritime sector, the Executive Partner of Alpham Insurance Brokers, Mr Gbolahan Adu blamed the inefficiency of marine insurance on the drastic drop in imports in the country.
He noted that before now, there had been a lot of fake marine insurance. He added that the intervention between CBN and NAICOM, which led to the advent of Form M, has mandated all imports get marine cargo insurance.
Adu stated that most shipowners are not really pressured as regards insurance because most of them are foreign players who only patronize their counterparts. He also said most cargoes in transit with Nigeria are not insured here, adding that only few ask for insurance policies because they feel they have no gain from it.
The insurance expert also noted that fake marine insurance has drastically reduced because every certificate is being uploaded where relevant agencies can easily access it. He opined that the decline in imports is not only affecting the insurance sector, but it is also a national issue, adding that the decline is probably as a result of people being tired of the business.
“Before now, there have been a lot of fake marine insurance. But because of the intervention by CBN and NAICOM, which led to Form M, so there is no import that comes in now that don’t get marine cargo insurance on it. What actually dropped is the import of goods which will invariably affect the cargo insurance. In as much as they are not importing goods, there won’t be insurance but if they are importing goods the insurance will be stable, because they won’t be able to access funds and customs would not clear them.
“About four to five years ago, there were lots of fake marine insurance, but it has really reduced because every certificate is being uploaded just as they do with motor insurance where the police and customs can access them. The import capacity as a nation has really dropped probably because people are tired of the business. It is not just affecting the insurance sector alone but a national issue.
“This is also applicable to the marine hull insurance which is the vessel. Most of the shipowners are not really being pressured because most of them are foreign players, so they will only patronize their own people. Most times the people that own goods in transit don’t insure their cargo. Some of the owners of the cargo just tell the owner of the vessels or trucks that they need to see their insurance policy. This is because the owners of the goods made it compulsory, if not they would not have even attempted it at all. Most of the haulage vessels and trucks don’t get insured; not because it is good but because they feel there is no gain on it” Adu stated.
On his part, the President of the Ship-owners Association of Nigeria (SOAN); Dr. Mkgeorge Onyung noted that every ship owner has a responsibility to insure his ship against any damage. He stressed that the ship owner is not responsible for the insurance of the cargo, but the Hull and machinery insurance as well as the P &I insurance which protects the ship from third-party liability.
Onyung lamented that there are many challenges and complexities associated with the insurance of vessels in Nigeria, which borders mainly on finance among others. He however called on all relevant stakeholders to join hands together to tackle the challenges in order to make that industry better, more productive, more lucrative and to improve the economy.
“The ship owner has a responsibility to insure his ship and should ask the cargo owner whether he has insured his cargo. However, the ship owner takes some insurance to insure himself against any damage which is Hull and machinery insurance while protecting the ship from third-party liability is P &I insurance. Those are the two insurance that covers the ship.
“Any other insurance covers the cargo. Just like car insurance, the cargo owner must insure his car. Maersk Line has 20,000 containers and will not be interested in every container. If the container arrives, the bill of laden states its liability. The point is we have a problem in the maritime industry. We should be able to tackle the problems to make that industry better, productive, more lucrative and improve the economy” Onyung appealed.