Marine insurance offers enormous potential for Nigeria’s maritime sector

Cynthia Ezekwe

Given the pivotal role of the maritime industry in facilitating international trade, it is evident that it is the most efficient way to transport large quantities of goods between countries. This is due to the sheer volume of cargo that can be carried on ships, as well as the speed and cost-effectiveness of maritime transport compared to other modes of transport. In addition, the maritime industry provides the infrastructure and connectivity needed to facilitate global trade, making it a vital component of the global economy.

The maritime sector plays a critical role in global trade and economic development, but it also faces significant challenges, including piracy, changing regulations, and infrastructure limitations.

The growth of maritime activity and shipping has also led to an increase in maritime crime, emphasizing the need for robust risk management strategies, such as marine insurance, to protect maritime businesses and their assets. Marine insurance helps to mitigate risk, encouraging further growth and innovation in the maritime sector. This is critical in light of the increasing risks and uncertainties faced by maritime businesses.

Marine insurance is a specialized type of insurance that covers the risks associated with maritime transport, including damage or loss of cargo, collision or grounding of a ship, piracy, and other perils of the sea. It is designed to protect businesses and individuals involved in international trade by mitigating the financial risk of transporting goods by sea. Without marine insurance, the risks associated with maritime transport would be too high for many businesses to bear. By transferring risk to insurers, marine insurance helps to keep the flow of international trade moving.

The Nigerian Marine Insurance Act of 1961 defines marine insurance as a contract in which an insurer agrees to indemnify an insured party for losses related to marine ventures, or losses resulting from transporting goods or passengers by sea. This means that marine insurance covers losses that are specific to the transportation of goods or people by sea, such as cargo damage, vessel damage, or losses due to piracy. The insured party is protected from these risks up to the limits specified in the insurance contract.

There are several different types of marine insurance available in Nigeria, including:

– Hull and machinery insurance, which covers physical damage to a ship and its machinery.

– Cargo insurance, which covers the loss or damage of goods during transport.

– War risk insurance, which covers losses due to war, piracy, terrorism, and other political risks.

– Marine liability insurance, which covers liability for injuries or damages caused by ships and their crew.

– Salvage insurance, which covers the costs of recovering a ship and its cargo in the event of a disaster.

Marine insurance offers several key benefits, including protection against financial losses due to construction delays, project cancellations, and weather damage. This creates opportunities for the development of new infrastructure projects in the maritime sector, while also protecting investors and developers from potential losses. Marine insurance is playing a critical role in enabling new port infrastructure, terminals, and other projects that are vital to the growth of the maritime sector in Nigeria. These projects in turn support the development of the broader economy.

The Lekki Deep Sea Port project is a great example of how marine insurance enables the development of new infrastructure projects that can create significant economic benefits for Nigeria. In this case, marine insurance is protecting the project from the risk of construction delays, which could cause financial losses for developers and investors. Without marine insurance, the Lekki Deep Sea Port project may not have been able to proceed, and Nigeria would have missed out on the jobs, infrastructure, and economic benefits it will bring. Marine insurance is helping to unlock the potential of the country’s maritime sector.

Weather damage is another major risk for the Lekki Deep Sea Port project, as bad weather can disrupt construction and cause financial losses. Marine insurance helps to mitigate this risk, providing financial protection against weather-related damage and ensuring that the project can be completed on time and within budget.

The Lekki Free Trade Zone is an excellent example of how marine insurance can generate positive ripple effects beyond the port itself. By providing financial security for the project, marine insurance is helping to attract foreign direct investment and create thousands of jobs in the area.

Marine insurance plays a crucial role in economic development by reducing risk and boosting investor confidence in the maritime sector. This results in increased investment and job creation, which benefits the local economy and improves living standards. Marine insurance is a key driver of sustainable economic growth.

However, the marine insurance industry in Nigeria faces significant challenges, such as a lack of local expertise. This has led to the country losing out on billions of naira in potential revenue.

The Nigerian maritime insurance market faces a number of challenges, including the prevalence of fraudulent operators and fake certificates, which has eroded confidence in the industry and led to a loss of premium revenue. The global market is also facing challenges, including huge losses from natural disasters and terrorist attacks.

In light of these challenges, experts have expressed concern about the poor performance of the marine insurance industry in Nigeria, despite the potential for growth. They argue that more needs to be done to address the challenges facing the industry and realize its potential.

According to NAICOM, marine insurance accounts for only two per cent of the total insurance market in Nigeria, which is a relatively small share compared to other types of insurance, such as life and motor insurance. This low share indicates the need for more investment and development in the marine insurance sector to realize its potential and increase its share of the total insurance market.

A report from the Marine Office Committee of the Nigerian Insurers Association found that a lack of marine insurance professionals is costing the sector up to NGN50 billion. The report called for urgent training of dedicated staff in marine insurance, noting that knowledge in this area is declining and that staff mobility is disrupting continuity. The committee also warned that insurers are not giving enough priority to vessel inspection and surveys, which could lead to significant losses if not addressed.

The report highlighted the need for more investment in the marine insurance sector, as well as better training and resources for staff.

The Marine Office Committee expressed concern that the presence of “fly by night” firms is contributing to the problems facing the marine insurance sector, noting that these firms are pushing for a relaxation of important terms and conditions.

The committee recommended that underwriters should not be involved in loss adjusting, brokerage, loss assessment, or pre-loss surveys, and that these functions should be handled by separate entities. This separation,it noted, would help to ensure a fair and transparent process and would protect the interests of policyholders.