War Risk Premium: The Lloyd’s Fraud Against Nigeria

By Babajide Okeowo

War Risk Premium: The Lloyd’s Fraud Against Nigeria

“War risk premium is the biggest fraud in the world”. This is the assertive declaration made by no other than a former Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Barr. Temisan Omatseye.

According to Investopedia, War risk insurance is coverage provided on losses resulting from events such as war, invasions, insurrections, riots, strikes, and terrorism. War risk insurance is offered as a separate policy as it is excluded from standard insurance policies due to the high risks involved.

According to a 2020 report by the non-profit group, Oceans Beyond, “The total cost of additional war risk area premiums incurred by Nigerian 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.

This development has been described as a big fraud by Omatseye, who was also the pioneer President of the African Shipowners Association while delivering the Keynote address titled “Measurable Strides In The Maritime Industry, Forging A Path Towards Sustainable Shipping” at the 5th edition of the Taiwo Afolabi Annual Maritime (TAAM) Conference at the University of Lagos (UNILAG), recently.

According to him, while a huge amount has been collected as war risk premium, no single claim has been made over the years and this huge cost paid as a premium has contributed to making Nigerian goods expensive.

“War Risk Premium is the biggest fraud in the world, take it from me. It is not only fraudulent but also criminal in nature. When I was the Director General of NIMASA, the leadership of Nigeria Liquefied Natural Gas (NLNG) approached me to complain about this war risk premium because it was too high. At that time, in 2009, Nigeria was paying about $400m a year on war risk premiums and that is only on NLNG Vessels and Large Carrier Vessels, but guess what, not a single claim was made.

“So, people just sit in Lloyd’s of London in the Joint War Risk Committee to collect these monies. Guess what, Nigeria’s rates are four times higher than what is charged on vessels going to Afghanistan. War Risk Insurance is an invisible charge that is built into the cost of shipping, so, everything you bring into Nigeria, they add it into that cost, and while you do not see the cost somebody is collecting that money”.

“For this reason, I always believe that the war risk premium is a fraud and I will stand by it,” he emphasized

For Emeka Akabogu, an expert in maritime law and policy, in order for Nigeria to be given a clean bill of health, there is the need to change the perception that our waterways are unsafe and insecure

“Perception is reality, so, if we are perceived to have insecure waters, if we are regarded to have sub-optimal procedures in regards to our processes, the chances are that operators and insurers will edge against the current of the rift which we are perceived to have, it is only natural.

“What we need to do is to ensure that our processes are in the implementation of whatever laws we have and in view of the enforcement that we do, it is important that we remove the drivers of those perceptions.

“We need to do more and say less. Thankfully, in the last two years, we have reduced cases of insecurity, not only in Nigeria, but across the Gulf of Guinea, but we need to ensure that those factors that drive the perception are reduced.

“In the last couple of weeks, indications have emerged that these premiums would be reduced or that Nigeria’s categorization in the region as regards countries which are subject to war risk will be removed, so, that is the way to go”, he added.

On his part, the Director General of the Nigerian Maritime Administration and Safety Agency(NIMASA),Dr Bashir Jamoh at different fora has disclosed that the focus of the Agency was sustaining the achievements recorded in recent times in the war against piracy ,adding that plans are in three categories of short, medium and long-term to resolve this issue.

“We are very optimistic that the clamour for the removal of war risk insurance premiums on Nigerian bound cargoes will soon yield positive results. The international community desires sustainability in the war on piracy and maritime crimes in Nigeria. The good thing is that they are part and parcel of our processes and procedures.

“We must continue this collaboration to ensure that the gains in recent times regarding the reduction of piracy results in the removal of war risk insurance premiums.” Jamoh said.

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