An executive partner, Alfam Insurance Plc, Gbolaham Adu, said local insurance companies were losing around $60 million in potential annual revenue to their overseas counterparts.
According to him, this is because foreign-owned tankers transporting crude into the country do not patronize local insurance companies.
Adu revealed this in an interview. He said: “The percentage of insurance coverage for vessels insured by local insurers is between 10 and 15 per cent.
“If the ships aren’t owned by a Nigerian, they won’t make it here. For example, if a vessel is owned by a Greek, they will do the insurance in Greece.
“There are many opportunities in the insurance sector, but the government must ensure local participation in transactions carried out in the country.
“If there is no application, we will not move forward. The country’s insurance industry loses about $5 million a month because of this.
He added that insurance sales are expected to increase as more local companies buy foreign assets.
He said: “For example, Seplat recently announced its intention to acquire some of the assets of ExxonMobil, at this level there would be more participation for insurance companies in Nigeria than before.
According to Adu, indigenous shipowners lack capacity, which affects the full participation of local insurance companies in the sector.
He added, “Vessels carrying crude oil to Nigeria do not patronize native Nigerian insurance companies because they are foreign owned. And you know that if it is done by Nigerians, it is easier for the insurance to be domiciled in Nigeria.
“But if it’s not done by Nigerians, there’s a limit to what you can do. Most of the indigenous shipowners who owned ships before have now closed and others are just moving on. So we have very few indigenous shipowners actually owned by Nigerians.
According to the chairman of the board of directors of the Association of Maritime Researchers and Writers of Nigeria, Eugene Nweke, local insurance companies have been trying to secure their position on the issue of cabotage.
He said: ‘You know there is a flip side on the issue of our insurance content under the Freight On Board policy, we ship our crude on FOB not Cost Insurance and Freight (CIF) but we bring our imports on CIF.
“If you’re talking about insurance on imported goods, it’s taken care of by the foreign shipping companies that bring in the cargoes. If it’s on exports, that’s where our insurance companies are supposed to be on the ground, but they have tried to secure their ground with the question of cabotage.
According to Nweke, most indigenous insurance companies are trying to partner with their foreign counterparts to improve the situation.
He said: “Most of our insurance companies are now trying to have a working relationship with some of their overseas counterparts. However, it is still an insult that we only ship our cargoes FOB.
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“We all know that even when shipping cargo on FOB, no shipping company will transport cargo without insurance; this therefore means that a foreign insurance pays for the voyage on Nigerian coastal vessels to wherever the vessel is going to unload the crude.
However, Cowry Assets Management CEO Johnson Chukwu said in an interview, “It’s a business decision, as the people raising the crude will determine which insurance company to use.
“The shipping risk is on them, if they choose to use Nigerian companies which will be determined by whether they feel the company can deliver the capacity for these cargoes. It is purely a business decision. If they think the company is big enough, they can ship there.
“But the bottom line is that most of the companies that extract Nigerian crude are not Nigerian companies, most of them are foreign-based companies.
And they would probably take out insurance with their local businesses because they feel they can handle any compensation that might arise in the event of a loss.