Forex crises: Insurers struggle to grow income from imports 

•Importers abandon full coverage, go for clause ‘C’ insurance

There are indications that the perennial crises in the Nigeria’s foreign exchange market have negatively impacted the projected growth in marine and shipping insurance business.

The enabling law, the Insurance Act 2003, under Section 67-(1) had required an insurance underwriting for all goods to be imported into Nigeria.

This law was further boosted with the adoption of Nigeria Insurance Industry Database, NIID, on marine insurance, which created the expectation in the insurance industry that marine insurance premium income will skyrocket.

However, Financial Vanguard’s findings show 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 Q1’23.

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.

It will be recalled that the NIID instituted by the Nigerian Insurers Association, NIA, is a central record of marine activities and was launched in 2019 to checkmate the activities of fake marine insurance operators and boost premium income massively.

While launching the marine NIID module, Managing Director of Nem Insurance Plc, Mr. Tope Smart said: “The marine NIID module will enhance premium growth for the industry.

“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: “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 sector 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.

”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.”