There are indications that the perennial crises in Nigeria’s foreign exchange market has negatively impacted the projected growth in marine and shipping insurance business.
Latest data has shown that the growth rate is far below what the industry operators expected after many years of the enabling law designed to spur growth went into full force.
However, findings have shown that the highest premium income recorded so far was N18 billion in the first quarter 2023.
This was despite the huge volume of transaction recorded in the import business, which stood at N5.3 trillion in first quarter of 2023.
Expressing disappointment, the insurance industry operators attributed this poor performance to the harsh foreign exchange market that has forced most importers to go for minimal insurance coverage, also known as third party marine insurance.
Managing Director of Nem Insurance Plc, Mr. Tope Smart, said, “Having achieved some level of progress with motor insurance since it took off in June 2012, the scheme is poised to bring down the level of fraud in marine insurance business, which is costing the sector billions of naira”.
Speaking on the situation, Managing Director of Guinea Insurance Plc, Mr. Ademola Abidogun, stated that “The issue of the constant rise in the value of the dollar against the naira is affecting a lot of businesses. It has adversely affected the import secto, and, because of that, some importers are not doing their insurances properly.
“So the high exchange rate and the unavailability of dollars have affected insurance too. Most importers are already paying huge prices for their goods because of the high exchange rate. Consequently, most importers will rather do clause ‘C’ insurance, which is equivalent to third party insurance for motor. Clause ‘C’ is actually the minimal insurance that importers can do.
“Another factor that is affecting maritime insurance premium income is that some importers get foreign exchange facility from the banks to facilitate their business because it is compulsory for them to go through the banks because of their type of imports.
“Unfortunately, due to scarcity of foreign exchange, many of such importers were forced out of business because there is no dollar to even do the importation.
“Insurance is compulsory for imports, so importers that have trade partnerships with banks, cannot do importation without obtaining foreign exchange facility through the banks. Consequently, that affected premium income as there was no import to underwrite in such instance.
“In the past, fake marine insurance thrived because the banks were not involved. But now, that is not the case because if importers have partnership with banks, they must do their insurance through an insurance company. However, the scarcity of foreign exchange has really affected us”.
Abidogun noted that the way forward is for all hands to be on deck with the insurance sector embarking on massive awareness drive.
He said, “Going forward, the insurance sector must not continue to be laid back. We must ensure that the law on marine insurance is enforced to the fullest.
Also, we must embark on awareness creation and build more awareness in the minds of the people especially importers on the importance and the role insurance can play in the foreign trade sector”.