Nigeria, graced with expansive coastlines and a strategic location in Africa, is uniquely positioned to reap the huge benefits that marine insurance offers if adequately harnessed, writes JOSEPH INOKOTONG.
Insurance plays a vital role in the development of the marine economy by providing financial protection and mitigating risks associated with marine-related activities.
There are many ways insurance helps in developing the marine economy. Marine insurance includes hull insurance, which covers damage or loss to vessels, ships and other marine equipment and cargo insurance which protects goods transported by sea against loss, damage, or theft. Liability Insurance covers third-party damages, injuries, or environmental damage.
Nigeria stands in better stead to reap the benefits of insurance to its marine economy through risk management and increased investment because insurance reduces financial risks, enabling businesses to invest in marine activities, just as insured vessels and cargo attract investors, promoting marine trade and economic growth.
Other benefits can be derived through job creation. A thriving marine economy creates employment opportunities in shipping, fishing and related industries culminating in economic stability as insurance payouts help stabilise businesses after losses, maintaining economic continuity.
In the spheres of compliance, insurance requirements ensure adherence to safety and regulatory standards. It engenders environmental protection because insurance coverage encourages responsible environmental practices and mitigates pollution risks. Trade facilitation – insurance facilitates international trade by providing security for cargo and vessels. Insurance supports coastal development, including tourism, fishing and port infrastructure.
There are specialised insurance products – offshore energy insurance, which covers oil and gas platforms, wind farms and other offshore energy infrastructure. Shipbuilding insurance covers risks during ship construction; fishing vessel insurance is customised insurance for fishing fleets. Port and terminal insurance covers port infrastructure and operations.
Appropriate measures should be instituted to fully tap into the benefit of marine insurance because enormous opportunities abound in the sector despite the challenges.
The phenomenon of climate change presents a threat that insurers must adapt to handle the increasing climate-related risks. Technological advancements: Insurers can leverage technology to improve risk assessment and management. Emerging markets: Growing marine economies in Asia, Africa and Latin America present opportunities for insurers. Regulatory frameworks: Insurers must navigate the complex international regulations.
By providing financial security and mitigating risks, insurance plays a critical role in supporting the growth and development of the marine economy.
An understanding of marine insurance and its applications will help in deriving the inherent benefits. Types of marine insurance include Hull and Machinery Insurance (H&M) that covers physical damage to vessels; Protection and Indemnity Insurance (P&I) covers third-party liabilities; cargo insurance covers damage or loss to goods during transit; marine liability insurance covers environmental damage, injury, or property damage; offshore energy insurance covers oil and gas platforms, wind farms and other offshore energy infrastructure.
Marine insurance coverage includes a voyage policy that covers specific voyages or trips and a time policy, which covers vessels for a set period (e.g., annual). Open cover policy provides coverage for all voyages within a specified period and floating policy covers multiple vessels under one policy.
Marine insurance can be applied in shipping and logistics; offshore energy (oil, gas, wind); fishing and aquaculture; ports and terminals; shipbuilding and repair; cruise and ferry operations; and marine construction (dredging, pipelines).
Key marine insurance companies include Lloyd’s of London, Swiss Re, Munich Re, AXA, Allianz, Zurich Insurance Group and Liberty Mutual.
The sector is highly regulated to ensure safety and marine insurance regulations come in multiple layers. There is the International Maritime Organisation (IMO); International Convention on Liability for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS); Convention on Limitation of Liability for Maritime Claims (LLMC); Marine Insurance Act (varies by country), etc.
Emerging trends in marine insurance are digitalisation and automation, cyber risk insurance, environmental and climate change risks, increased focus on safety and compliance, growing demand for specialised insurance products, etc.
Marine insurance comes with challenges like complex risks and liabilities, regulatory compliance, climate change and weather-related risks, cybersecurity threats and rising costs and premiums, among others.
Innovative marine insurance products like parametric and cyber insurance cover specific weather-related risks, cyber-attacks and data breaches. Supply chain insurance covers disruptions to marine supply chains. Sustainable marine insurance encourages environmentally responsible marine practices.
Again, some challenges likely to emerge in marine insurance borders on climate change, which may appear via rising sea levels, more frequent natural disasters and changing weather patterns that increase risks for marine insurers. Cybersecurity threats and increased digitisation in the marine industry expose insurers to cyber-attacks and data breaches. Regulatory Complexity evolving international regulations, such as IMO and EU directives, require insurers to adapt. Supply chain disruptions: Insurers must address disruptions to global supply chains caused by events like pandemics or trade wars. Technological advancements: Insurers must keep pace with emerging technologies, such as autonomous vessels and digital cargo management.
The enormous opportunities in the sector include growing emerging markets as increasing marine trade in Asia, Africa and Latin America presents opportunities for insurers. Sustainable marine practices: Insurers can encourage environmentally responsible marine practices through specialized policies. Digitalisation and automation: Insurers can leverage technology to improve risk assessment, reduce costs and enhance customer experience. New marine industries: Insurers can capitalise on growth in offshore renewable energy, aquaculture and cruise tourism. Innovative insurance products: Insurers can develop parametric, cyber and supply chain insurance products to address emerging risks.
Addressing the challenges in the sector and capitalizing on the opportunities entail investing in technology. Insurers can leverage AI, blockchain and IoT to improve risk management and customer engagement. Diversification: Insurers can expand into new markets, industries and product lines to reduce dependence on traditional markets.
Collaboration: Insurers can partner with marine industry stakeholders to develop innovative solutions. Talent acquisition and development: Insurers can attract and retain expertise in emerging areas like cybersecurity and sustainability.
A renowned insurer, Edwin Igbiti, in a recent keynote address at the Summit on Marine and Aviation Insurance, organised by Risk Analyst Consultants (UK) Limited, in collaboration with the Chartered Insurance Institute, United Kingdom, said the marine and aviation sectors are fraught with complexities, from the volatile nature of the sea and air to the intricate legal and regulatory frameworks that govern these industries. He urged professionals in the field to have a deep understanding of these industries.
According to him, operators in the marine insurance realm have witnessed the ripple effects of global events on their local markets, stressing that the shifting tides of international trade agreements, piracy concerns off coasts and the ever-present threat of environmental calamities are but a few of the realities insured against daily.
Igbiti submitted: “Each vessel that embarks upon the waters, each aircraft that takes to the skies, carries with it the aspirations of Nigeria. They carry our people, our goods, our hopes and with each journey, they carry the trust that we, as insurers, have done our utmost to protect those aspirations from harm.”
The marine insurance sector is fraught with complexities, from the volatile nature of the sea to the intricate regulations governing its operation, but underneath lays great potential.
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