War Risk Insurance Premium Progress In Nigeria Risk Reversal Due To Developments In The Gulf

Indications have emerged that the reduction educt in the War Risk insurance premium in Nigeria may be reversed owing to recent trends in the Gulf of Guinea (GoG). A report by the International Maritime Bureau (IMB) showed that there has been an increase in the number of reported pirate attacks in the Gulf. 

Nigeria which was among the eight countries comprising the states in the Gulf of Guinea (GoG),  including Benin, Côte d'Ivoire, Ghana, Guinea, Liberia, Sierra Leone, and Togo facing piracy challenges was delisted from the IMB list of piracy-prone countries in March 2022.

The Gulf of Guinea is the Northeasternmost part of the tropical Atlantic Ocean from Cape Lopez in Gabon, North and West to Cape Palmas in Liberia. 

It has a Regional Office based in Abidjan.

For decades the region has been engulfed in a flux of piracy. From time to time vessels coming into the region have had to be hijacked, the crew members kidnapped for ransom and crude oil and other valuables stolen.

Subsequently, Nigeria was free from the War Risk Premium tag that reduced high insurance premiums for ships in Nigerian-controlled waters to about 960 dollars as against 5,000 per dollars shipment.

As piracy and armed robbery incidents in the GoG reduced, the report said that only five incidents were reported in the first quarter of 2023 compared to eight in the first quarter of 2022 and 16 in 2021.

However, a new IMB reports have warned of a reversal of the progress which the country recorded in the past three years.

Worried about the development, Dr. Eugene Nweke, a maritime expert and former President of the National Association of Government Approved Freight Forwarders identified underlying reasons for the escalation of criminalities in the GoG.

Nweke linked the menace to the GoG's rich offshore oil deposits and metal ore deposits, such as cobalt crusts, and the poly-metallic nodules (containing nickel, cobalt, copper, and manganese). 

Others are polymetallic sulphides (containing zinc, silver, copper, and gold), as well as monazite sand (containing significant amounts of uranium), as well as deposits of diamond, gold and phosphorus.

The maritime expert and former President of the National Association of Government Approved Freight Forwarders spoke during the maiden annual lecture of the Maritime Reporters Association of Nigeria, MARAN titled, "Maritime Security: Emerging Threats and Actionable Steps." 

These rich resources made the GoG one of the world's most important shipping routes for both Gulf of Guinea oil exports from the Niger Delta and consumer goods to and from Central and Southern Africa. 

Daily there are about 1,500 fishing vessels, tankers and cargo ships navigating the gulf's waters.

Cases of piracy and armed robbery in the GoG peaked in 2020 with 123 incidents. 

In recent years, pirates have increasingly targeted ships to kidnap crews for ransom, but these attacks have reduced significantly with 45 incidents in 2021 and two incidents in 2022. Nigeria recorded zero case incidents in 2022.

The International Maritime Bureau's Piracy Reporting Centre (IMB PRC) said in its latest report that piracy incidents in 2022 decreased by 46 per cent compared to 2021 and by a factor of four compared to 2020.

The report attributed the reduction to several factors, including the impact of piracy convictions in Nigeria and Togo in July 2021, the deterrent effects of increased naval patrols by Nigeria, and the deployment of international Navies to the region, along with improved cooperation among Gulf of Guinea countries.

Similarly, Maritime Security expert, Captain Warredi Enisuoh of Tantitan Security Services who delivered a paper at the MARAN Annual Lecture said that the reduction in criminalities in the GoG was also a result of the steps which some foreign ship owners took to protect their ships.

He said that American and Israeli-flagged ships are easily converted to warships within one hour when they are faced with threats of attack or when attacked.

He said other countries have adopted that strategy as well.

The significant achievements of Nigeria in reducing security threats in the Maritime domain have led to a reduction in the high insurance premium for ships in Nigerian-controlled waters.

This followed the delisting of Nigeria from the International Maritime Bureau (IMB) list of piracy-prone countries in March 2022, and consequently the lifting of the War Risk Premium tag on Nigeria that reduced high insurance premiums for ships in Nigerian-controlled waters to about 960 dollars as against 5,000 per dollars shipment.

Unfortunately, the reduction in the War Risk insurance premium may be reversed owing to current trends in the GoG. There has been a rise in reported incidents of pirate attacks in the Gulf.

The latest IMB report for the period of January-September 2023, released in October says that ninety-nine incidents of piracy and armed robbery against ships were reported in the first nine months of 2023 which showed an increase from 90 incidents for the same period in 2022.

The report says 85 vessels were boarded, nine had attempted attacks, three were hijacked and two were fired upon.

It acknowledges that violence towards crew members is among the lowest in three decades, the risk to the crew remains real with 69 taken hostage, 14 kidnapped, eight threatened, three injured and one assaulted.

In the report, the IMB Director, Micheal Howlett, said, "The Gulf of Guinea stands as a region of concern with a rise in reported incidents, as opposed to the downward trend we have seen in the past two years."

Any further increase in War Risk insurance premiums for Nigeria will translate to an increase in poverty for Nigerians as the extra cost will be passed to the citizens. It will worsen inflation which is already at 27.33 percent, the report added.

Sadly too, the prospect of a decrease in the War Risk insurance premium might take a U-turn due to the prevailing developments in the GoG. It appears that there has been an upsurge in the number of reported pirate attacks in the Gulf.