NIMASA moves to end War Risk Insurance on Nigeria-bound imports
The Nigerian Maritime Administration and Safety Agency NIMASA has expressed deep worries over the continued imposition of War Risk Insurance premium on Nigeria-bound cargo, saying that there was urgent need to end the regime, especially given the declining rate of piracy on the nation’s waters in particular and the Gulf of Guinea as a whole.
War risk insurance is a type of insurance, which covers damage due to acts of war, including invasion, insurrection, rebellion and hijacking. Some policies also cover damage due to weapons of mass destruction. It is most commonly used in the shipping and aviation industries.
Recall that there has been a drastic reduction in the rate of piracy and other forms of insecurity on the country’s waters and the Gulf of Guinea region since February when NIMASA deployed its Integrated National Security and Waterways Protection Infrastructure, also called the Deep Blue Project.
According to the nonprofit Oceans Beyond Piracy’s 2020 reports, the total cost of additional war risk area premiums incurred by Nigeria- bound ships transiting the Gulf of Guinea was $55.5 million in 2020 alone, and 35 per cent of ships transiting the area also carried additional kidnap and ransom insurance totaling $100.7 million.
Director General of the agency, Dr. Bashir Jamoh, while expressing deep worries, observed that the country’s maritime trade has been threatened due to the increasing war risk insurance premium now being paid by Nigeria-bound vessels.
He observed that though piracy on the Nigerian waters is waning, stakeholders in the industry are worried that offshore underwriting firms still insist on very high premium to be paid by those conveying cargoes to Nigeria.
The DG had while speaking during the recent official flag-off of the Deep Blue Project in Lagos by President Muhammadu Buhari, said: “Since the deployment of the deep blue project assets in February, there had been a steady decline in piracy attacks on the Nigerian waters on a monthly basis.
“We therefore invite the international shipping community to rethink the issue of war risk insurance on cargo bound for our ports. Nigeria has demonstrated enough commitment towards tackling maritime insecurity to avert such premium burden.”
Insecurity got so bad in the region before the deployment of the deep blue project that global insurance firm Beazley now offers “Gulf of Guinea Piracy Plus,” a bespoke insurance plan for maritime crew travelling through the area.
The plan provides compensation for illegal vessel seizures and crew kidnappings even in the absence of ransom demands. It tracks insured vessels on a 24-hour basis, but because the risks are so high, it limits claims to $25 million.
One of the effects of this additional spending by shippers is that it is transferred as a burden on final consumers in form of higher cost for imported goods, with the attendant inflationary trend it comes with.
“While the deep blue project enters implementation stage, NIMASA will not be complacent as it will continually evolve strategies including wide consultation with stakeholders and application of cutting edge technology in the fight against maritime insecurity.
Available records show that the war risk premium 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, the war risk phenomenon, which was only known to countries with high rate of piracy such as Somalia, also found its way into Nigeria following massive involvement of youths in the Niger Delta in militant activities.