Concerns as Nigeria incurs $400 million war risk insurance premium

Concerns are growing over Nigeria’s continued payment of a $400 million war risk premium to foreign insurance companies, despite zero record of attacks on vessels within the country’s territorial waters in the past three years.

For years, foreign insurance firms have required operators in the Nigerian maritime sector to pay the war risk insurance premium due to piracy, hijackings, armed robbery, invasions and kidnappings targeting Nigerian ports-bound cargoes.

War risk insurance covers losses from events such as insurrections, riots, military coups, terrorism and other related incidents. The premium varies based on the expected stability of countries.

Under former President Muhammadu Buhari’s administration, the Federal Government, through the Nigerian Maritime Administration and Safety Agency (NIMASA), invested $195 million in the Deep Blue Project, a comprehensive maritime security initiative.

The project integrates coastal surveillance, airborne monitoring, command and control centres and response vessels, significantly enhancing Nigeria’s ability to combat maritime crime, including piracy, armed robbery, human trafficking, smuggling, oil theft and illegal fishing.

Since its launch in 2021, the Deep Blue Project has been instrumental in reducing piracy, sea robbery, kidnapping and other maritime crimes in Nigerian waters and the Gulf of Guinea.

As a result of these improvements, Nigeria has received praise from the International Maritime Organization (IMO) and the International Maritime Bureau (IMB) and the country was removed from the international list of piracy-prone nations.

However, despite the positive developments, foreign insurance firms continue to impose war risk surcharges on Nigerian-bound cargoes, even though Nigeria handles approximately 70 per cent of Africa’s cargo.

NIMASA had vowed to seek the support of the United Nations (UN) to address the continued imposition of war risk surcharges on Nigerian-bound cargoes, citing the significant reduction in piracy and sea robbery in the country’s waters.

However, stakeholders have expressed frustration that companies like Lloyd’s of London still apply these premiums, inflating freight costs for imports and exports.

They called for a unified effort to ensure that Nigeria is no longer penalised for improvements in its maritime security.

The Managing Director/Chief Executive Officer of Kamany Marine Services Limited, Charles Okerefe, questioned why Nigeria still pays hefty premiums to international insurance firms despite improved maritime security.

He pointed out that Nigeria remains an IMO member and is campaigning for Category C elections, asking why the country’s representatives at the IMO have not advocated for a reversal of this trend.

Okerefe recalled that the former IMO Secretary-General acknowledged that Nigeria’s waters have become much safer.

“It is our representatives at the IMO who should be pushing for the reversal of issues like war risk insurance. What efforts is the Ministry of the Marine and the Blue Economy making to engage the international shipping community and reverse the trend of charging war risk premiums on vessels and cargoes coming to Nigeria?”, he stated.

Okerefe stressed that NIMASA should be actively engaging with ship owners and the international shipping community to ensure that Nigeria is not unfairly penalised with war risk charges.

He emphasised that war risk insurance should apply only in areas where maritime security remains a concern, noting that Nigeria’s waters and ports have improved significantly in recent years.

The President of the Nigerian Chamber of Shipping (NCS), Aminu Umar, echoed these concerns, calling for increased engagement with the Lloyd’s syndicate, which manages the war risk insurance.

He recommended that NIMASA, in collaboration with stakeholders, engage the Joint War Committee, the body responsible for either waiving or maintaining the war risk insurance on vessels in the region.

Umar said the ongoing imposition of war risk premiums continues to affect the cost of shipping to Nigeria, despite significant progress in securing the nation’s maritime environment.