HomeBUSINESSBUSINESS UPDATESNigeria Incurs N3.4 Trillion Loss Due to War Risk Insurance Payments

Nigeria Incurs N3.4 Trillion Loss Due to War Risk Insurance Payments

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IMG 20240520 WA0021By Fasuyi Tolulope

Nigeria has suffered financial losses exceeding N3.4 trillion ($2.4 billion) over the past six years, attributed to War Risk Insurance (WRI) premiums paid annually to Lloyd’s of London, Protection and Indemnity (P&I) Insurance, and other international firms. These premiums, covering crew and cargo, compensate for potential damages from acts of war, including invasions, insurrections, rebellions, and ship hijackings.

The WRI consists of two components: war risk liability, covering people and items inside the craft, calculated based on indemnity amounts; and war risk hull, covering the craft itself, calculated based on its value. Despite no significant war incidents since 2018, Nigeria has been paying at least $400 million annually to these insurance firms.

Dr. Dayo Mobereola, Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), expressed concern over these charges. At a stakeholders’ meeting in Lagos, he criticized the ongoing War Risk Premiums imposed by P&I insurance companies on Nigerian-bound vessels, despite no recent piracy or attacks in Nigerian waters.

Dr. Mobereola stated, “We need to convene and challenge the insurance companies, including Lloyd’s, questioning why Nigeria is equated with war zones like Sudan and Somalia when there has been no war here since 1966. It’s unacceptable that every vessel on Nigerian waters requires private security yet still incurs War Risk Premiums.”

Former NIMASA Director General, Barrister Temisan Omatseye, also condemned the premiums as fraudulent. “War Risk Premium is the biggest fraud globally. During my tenure, Nigeria paid about $400 million annually for this insurance without any recorded claims to justify it. The rates imposed on Nigeria were exorbitantly higher than those for vessels heading to war-torn Afghanistan,” he remarked.

The former NIMASA Director General, Bashir Jamoh, highlighted the economic impact of these premiums. “As an import-dependent nation, Nigeria’s economy is heavily affected by these additional costs. The WRI premiums, a penalty for past insecurity, significantly inflate the cost of goods in the market.”

Jamoh mentioned that the Federal Government plans to demand Nigeria’s removal from the War Risk Insurance status to alleviate these financial burdens. The persistent imposition of WRI on Nigerian-bound cargoes continues to strain the nation’s economy, underscoring the need for reevaluation and action.

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