The deployment of the Deep Blue asset seems to have restored some degree of sanity in Nigerian waters and to some extent, the Gulf of Guinea (GoG) in terms of security. However, the body language of international insurance underwriters indicates that Nigeria might have to wait a little longer to see an end to war risk surcharges on inbound cargoes, writes TOLA ADENUBI.
War risk surcharge
This is a supplementary carrier charge that is only applied when insurance underwriters designate specific zones as war risks. It covers more than actual wars (invasion, insurrection) including international events that may be escalating toward war, and areas where hijacking (piracy) is prevalent. The surcharge is levied to recover potential extra costs, such as re-routing or additional security. It generally has two components: War Risk Liability, which covers people and items inside the craft and is calculated based on the indemnity amount; and War Risk Hull, which covers the craft itself and is calculated based on the value of the craft. The premium varies based on the expected stability of the countries to which the vessel will travel.
According to nonprofit Oceans Beyond Piracy’s 2020 report, “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.
“Insecurity got so bad in the region before the deployment of the deep blue project that global insurance firm Beazley now offers ‘Gulf of Guinea Piracy Plus,’ a bespoke insurance plan for maritime crew traveling through the area.
“The plan provides compensation for illegal vessel seizures and crew kidnappings even in the absence of ransom demands. It tracks insured vessels on a 24-hour basis, but because the risks are so high, it limits claims to $25 million.
“Effect of this additional spending by shippers is the transfer of the burden on final consumers in form of higher cost for imported goods.”
Calls for war risk cancellation
Since the deployment of the Integrated National Security and Waterways Protection Infrastructure popularly known as the Deep Blue project, Nigerian waters has witnessed a drop in the numbers of attacks on ships navigating through the West African coastline, thereby necessitating calls for international insurance underwriters to stop the collection of such surcharges on Nigerian bound cargoes.
Speaking recently during the recent official flag-off of the deep blue project in Lagos by President Muhammadu Buhari, Dr Bashir said “Since the deployment of the deep blue project assets in February, there had been a steady decline in piracy attacks in the Nigerian waters on a monthly basis.”
“We therefore invite the international shipping community to rethink the issue of war risk insurance on cargo bound for our ports. Nigeria has demonstrated enough commitment towards tackling maritime insecurity to avert such premium burden.
“It is the common man on the streets who is bearing the cost of these war risks surcharges because the shipper adds all shipping charges incurred on cargoes for the importer, who in turn, after paying all these charges to clear the cargoes, adds such costs on the value of goods in the market. It is time the shipping lines scrap these surcharges.
“It is significant that critical stakeholders in the world shipping community, like Lloyd’s List, are recognising Nigeria’s efforts to make the Gulf of Guinea safe and secure for seafarers and ships.
“It would be unfair for the world to sidestep such huge investment and commitment to maritime security and retain the high war risk insurance premium on ships bound for our waters.”
Why trend may persist
For maritime security experts, international underwriters will think it’s still too early to start judging the gains of the Deep Blue asset deployment. Speaking with the Nigerian Tribune, a former Director with Global West Vessel Specialist Limited, a maritime security firm, Mr Leke Olugbenga Oyewole explained that it’s still too early to start counting the gains of the Deep Blue assets. Deep Blue was just commissioned by Mr President about a month ago, so I think it’s too early to start clamoring for the shipping companies to scrap war risk surcharges.
“For underwriters like Lloyds, I am sure they will like to observe the situation in the GoG for a minimum of six months. Even if the Deep Blue was deployed months before Mr. President commissioned it, underwriters will still not want to rush to cancel the surcharge because they will need a period of time to be sure that the GoG is safe from piracy attacks.
“Just at the weekend, the Niger Delta Avengers (NDA) returned with the launch of ‘Operation Humble’ which it said is to cripple the economy through the destruction of oil installations in the Niger Delta region. The group said it is going back to the creels after about three years of absence.
“These are issues that international underwriters will be looking to evaluate upon. Yes, I appreciate the Director General of NIMASA for speaking up against the continued collection of war risk surcharges on Nigerian bound cargoes. That somebody is even advocating against the continued collection of the surcharges on Nigerian bound cargoes should be commended.
“However, we have to tidy our home front first. Yes, the Deep Blue is to cover the GoG, but if we focus on the region and less concentrate on our home front, it might not work. The Niger Delta is a key factor to the success of the Deep Blue project. The area is dominated by oil companies with lots of offshore facilities that are only accessible with the use of boats and ships. If the NDA makes do its threat, then Nigeria will have lots of convincing to do for international underwriters.
“So, for Nigeria to see an end to the war risk surcharges, we will need our waters to be devoid of any attacks on ships or offshore oil and gas facilities in the next six months or even a year. That is when we can boldly question the rationale of the international underwriters if they continue to slam war risk surcharges on Nigerian bound cargoes.”
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