Tin Can Island Port is the second busiest Port in Nigeria after Apapa Port in Lagos state, and ever since operational and infrastructural challenges at the nation’s ports and access roads have continued to push insurance firms underwriting cargoes to the edge.
According to guardian.ng, beyond additional costs incurred by Nigerian importers and exporters due to safety concerns in the Gulf of Guinea (GoG), These have made them adjust clauses, and in many cases, spike the cost of cargo insurance by the average number of days delays occur.
The sum insured for specific transit policy is calculated considering the invoice value, freight cost and the incidental expense.
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For instance, shippers deposit N150, 000 to N200, 000 for insurance on containers for moving their goods from the port, while an average number of 60 days is calculated in insurance premiums for delays for cargo transiting to the ports.
All of these costs have implications on the cost of goods, especially at a time inflation remains high and disposable incomes very weak.
Similarly, the persistent difficulty in accessing the nation’s major seaport, Apapa, is taking its toll on movement of non-oil exports and affecting foreign earnings, with earlier studies by the organized private sector putting the loss at $10 billion yearly.
While standard marine cargo and contingent business interruption in insurance policies require physical loss or damage to trigger coverage, any losses companies incur when shipments are late are not insurable.
This is categorized under moral hazard in some underwriting firms. The scenario has made it only somewhat more favorable for machinery/equipment import/export, while non-oil export continues to suffer.
Already, firms underwriting cargo businesses in the country noted that they are currently overwhelmed by avoidable claims, resulting from damages of goods meant for export and risks associated with handling.
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With general merchandise and perishable goods, there usually aren’t any cost-effective opportunities for either minimizing potential losses or transferring the risks via insurance.
The reasons are that the companies on both ends of a transaction have virtually no control over how products travel from origin to destination.
Once a shipment is consigned to a broker or freight-forwarder, the cargo owner isn’t involved in determining the ship(s) that carries it or the route the ship takes, including any intermediate stops made along the way.
Factors such as poor access roads to ports and multiple checks by government agencies cause delay in delivery and thereby lead to damages of perishable goods; while fake documentation of insurance papers also pose danger to operations of genuine insurance firms.
It was confirmed that such situations have led to increased claims and huge premium arrangements involving billions of naira on a monthly basis.
