Importers pay $1.5bn war risk premium despite reduction in piracy

Despite the reduction in piracy attacks in the Gulf of Guinea, importers paid $1.5bn as war risk insurance premiums on Nigeria-bound cargoes in the last three years, The PUNCH reports.

This came as operators, including shipowners and ship captains, rejected the WRI premium, stating that Nigeria is not a war-torn country to be paying such a premium.

The Nigerian Maritime Administration and Safety Agency on Thursday, revealed that in the last three years, Nigeria paid over $1.5bn to Lloyd’s of London, Protection and Indemnity Insurance, and other foreign insurance firms in War Risk Insurance Premium.

The Head of Public Relations at NIMASA, Osagie Edward, stated this in a statement made available to our correspondent in Lagos.

Data from NIMASA showed that Nigeria has 4,610 flagged vessels with a total tonnage of 6,131,814.55 gross registered tonnage and 1,102 cabotage vessels with a combined tonnage of 2,037,184.63 GRT.

This means a total of about 4.610 vessels might be paying this WRI premium.

War Risk Insurance Premium is an additional surcharge imposed by international shipping companies on cargo bound for Nigeria. It comprises two key components: war risk liability, which covers people and goods aboard the vessel and is calculated based on the indemnity amount, and war risk hull, which covers the vessel itself and is determined by its value.

Edward explained that the financial burden was initially introduced during the height of Niger Delta militancy and piracy. He stated that the impact of this payment on Nigeria’s economy is staggering.

According to Edward, for a very large crude carrier valued at $130m, “the WRI surcharge per voyage is approximately $445,000. For new container vessels valued at $150m, the cost rises to $525,000 per voyage.”

“Although the Nigerian Bureau of Statistics does not have precise data on the total WRI payments made to international insurers, available figures indicate that Nigeria has paid over $1.5bn in the last three years alone to Lloyd’s of London, Protection and Indemnity insurance, and other foreign insurance firms,” Edward said.

Edward highlighted that Maersk Line, one of the world’s largest shipping companies, also introduced a transit disruption surcharge of up to $450 per container, while other shipping lines impose a war risk surcharge of $40–$50 per 20-foot container.

However, Edward mentioned that recognising the severe economic implications of the WRI, NIMASA, under the current leadership of Dr Dayo Mobereola, has launched an aggressive campaign to eliminate war risk insurance on Nigeria-bound cargo.

Edward said the NIMASA Act and the Merchant Shipping Act mandate the agency to promote shipping development, and removing the WRI premium has become a central focus of its maritime reforms.

“The security concerns that originally justified these premiums no longer exist,” Edward said.

He stressed that the country has not recorded a single piracy incident in over three years, “and in 2021, the International Maritime Bureau officially removed Nigeria from its list of piracy-prone countries.”

He maintained that in the past five years, NIMASA, in collaboration with the Nigerian Navy, has led an unprecedented crackdown on piracy in the Gulf of Guinea, earning global recognition from the International Maritime Organization.

Edward lamented that despite these achievements, international shipping companies have continued to impose war risk insurance premiums on Nigeria-bound cargoes.

He added that in 2023, the International Bargaining Forum further validated Nigeria’s progress by delisting the country from the list of high-risk maritime nations.

The NIMASA’s image maker queried that, with piracy no longer a concern, why has the international shipping community continued to impose these excessive premiums?

He added that to address these issues, the Ministry of Marine and Blue Economy and the Ministry of Defense made significant investments in maritime security through initiatives like the Deep Blue Project, “which has successfully eliminated piracy in the country’s waters for over 30 consecutive months, a record unmatched anywhere in the world.”

He reiterated that the country collaborates closely with the IMO and other international bodies to combat maritime threats, further reducing its risk classification.

Edward said that the Secretary General of IMO, Arsenio Dominguez, has publicly commended Nigeria’s efforts in securing the Gulf of Guinea.

“Despite these improvements, shipowners and insurers have refused to acknowledge Nigeria’s new security status, continuing to levy exorbitant premiums on vessels operating in the country,” he lamented.

Meanwhile, determined to break this cycle of financial exploitation, Mobereola, under the directives of the Minister of Marine and Blue Economy, Adegboyega Oyetola, took Nigeria’s case to international stakeholders, urging them to support the removal of war risk insurance premiums.

The NIMASA DG also engaged Chatham House, where he met with Dr Alex Vines, Director of the Africa Programme, who agreed to escalate the matter to the United Nations.

“NIMASA has also engaged major global shipping organisations, including Baltic and International Maritime Council, the world’s largest shipping association, International Chamber of Shipping, and International Association of Dry Cargo Shipowners, among others,” he stated.

Edward averred that while discussing with these associations, Mobereola emphasised that Nigeria has invested billions in maritime security, yet continues to be unfairly penalised.

He urged the global shipping community to recognise the country’s improved security status and remove the unjustified WRI premiums.

The Deputy Secretary General of BIMCO, Stinne Taiger Ivø, acknowledged Nigeria’s progress and stated that shipowners should take the lead in pushing for lower premiums.

Similarly, Zhou Xianyong of INTERCARGO assured NIMASA of their support in Nigeria’s campaign to be delisted from war risk insurance premium zones.

“Reducing these premiums is critical for Nigeria’s competitiveness in global trade. Lower shipping costs will encourage more international trade, attract foreign investment, and strengthen Nigeria’s position as a leading blue economy player,” Xianyong said.

Edward added that recently the agency met with a Danish delegation led by Kristin Skov-Spilling, Chief Technical Advisor from the Danish Ministry of Foreign Affairs, urging Denmark to advocate for a reduction in war risk insurance premiums.

“Maersk Line contributes over 15 per cent of the country’s gross domestic product. If Denmark exerts pressure on Maersk, other shipping companies will likely follow suit,” he said.

Commenting on the issue, the President of the National Association of Master Mariners, Capt Tajudeen Alao, admitted that Nigeria has remitted so much for world risk insurance.

He said this has made the freight rate for cargoes coming to Nigeria higher than others.

“The freight rate is higher for Nigerian-bound cargoes because it is a threat for any ship going into this zone. That means you have to pay higher for freight and higher for insurance premiums,” Ajao explained.

He said before now, importers were paying about £6,200 as freight for a 20-foot container on vessels coming from the United Kingdom to Nigeria.

Also speaking, a shipowner, Capt Emmanuel Iheanacho, argued that war risk insurance is paid on cargoes going to war areas.

He said that the war risk premium is stripping value from the Nigerian economy.

“You normally pay for normal insurance, but then the war risk is paid if you’re going to operate in a war-like area where there is war. So we argued that Nigeria cannot be classified as a war-risk area and that the extra premium that insurance companies charge is unnecessary.

“They are stripping value from the Nigerian economy by placing those extra charges. So that’s the situation. War-risk insurance in the Nigerian context, in my understanding, I think a lot of people are taking advantage of people’s lack of knowledge of international trade and shipping issues, and they are earning monies that they are not entitled to,” Iheanacho said.

A former President of the Shippers Association, Lagos State, Jonathan Nicol, said that all the payments must be documented, and that there is no place in the Bill of Lading where the WRI is captured.

“We are not at war, and countries around us are not at war, so I don’t see the reason why we are paying the WRI when we are not at war or threatened by war. We expect them to protect us from such payment because we are not at war,” Nicol said.