Marine Insurance in Nigeria Explained

What Is Marine Insurance?

Marine insurance is a contract (a promise) between two parties: the insurer (the company that provides protection) and the insured (person or company who pays for it). The promise is: if there’s a loss related to sea transport (or related things like loading, unloading, port risks), then the insurer will pay some money to cover that loss, according to agreed terms.

This loss could be damage to cargo, damage to the ship (the “hull”), or legal claims (liabilities) if something goes wrong.

Why Marine Insurance Exists (Purpose)

To reduce financial risk for businesses and shipowners when transporting goods or operating ships.
To ensure trade and shipping can continue even when accidents or unforeseen disasters happen.
To meet legal requirements: many laws or regulations in Nigeria/international trade require marine insurance.
To give peace of mind: people importing or exporting goods, or owning vessels, know they have a safety net.

Key Principles and Important Terms

To understand marine insurance, you should know some core principles and terms. These make sure everyone knows what to expect.

Principle / Term	What It Means
Insurable interest	The insured must have a stake in the thing insured. For example, a cargo owner has interest in the goods; a shipowner in the vessel. If it gets lost/damaged, they suffer a loss.
Utmost good faith	Both insurer and insured must tell the truth and give all important information. If not, claims may be denied.
Proximate cause	The event that directly caused the loss must be covered. If loss is from a chain of events, you look for the nearest cause.
Indemnity	The insured should be put back (financially) to as close as possible their position before the loss, not better. They don’t profit from a loss.
Subrogation	After insurer pays you for a loss, insurer can step into your shoes to recover money from any third party that caused the loss.
Contribution	If more than one policy covers the same thing, insurers share the cost, not the insured getting double.

Also, some special terms:

Hull: the body of the ship/vessel, its structure & main machinery.
Cargo: the goods being carried.
Freight: the money charged for carrying goods, or the value related to that.
Liability: the legal responsibilities one party has if damage/injury happens to someone else.
Perils: risks that can cause damage (storms, fire, sinking, pirates etc).

Types of Marine Insurance in Nigeria

Different situations need different kinds of cover. Below are the common types in Nigeria, with what each covers and some examples.

Hull Insurance

What it covers: damage to the vessel itself: hull (body), machinery, gear, equipment. Also damage when ship is in port or dock (port risks), or while traveling.

Who uses it: shipowners, operators of fishing vessels, offshore oil & gas vessels, barges, tugs, etc.

Example: A company owns a coastal ferry that operates between Lagos and a nearby island. If the ferry suffers damage from storm or collides with another vessel, hull insurance helps pay for repairs.

Cargo Insurance

What it covers: goods being moved (imported/exported), from the point of loading, through transportation (sea, air, land if covering intermodal), until delivery. Covers loss or damage from perils like sinking, fire, theft, water damage.

Clauses: There are Institute Cargo Clauses “A”, “B”, “C” etc.

Clause A (All Risks) is the widest cover. Except for things explicitly excluded, many problems are covered.
Clause C is more restricted; covers named perils (e.g. fire, sinking, collision) and usually excludes smaller perils.

Example: A trader imports electronics from China to Nigeria. On the sea voyage, a container is damaged due to water ingress. Cargo insurance covers repair or replacement cost (depending on policy).

Freight Insurance

What it covers: the money (freight) the shipowner or carrier expects to receive, in case cargo is lost/damaged so they don’t get paid.

When used: cargo is lost/damaged before it gets delivered; the shipowner or freight forwarder wants to protect their right to the freight.

Example: A shipping company contracts to carry garments. If the cargo sinks, they lose the freight fee. Freight insurance helps them recover that loss.

Protection & Indemnity (P&I) / Marine Liability

What it covers: legal liabilities. For example, third‑party claims: if the ship causes damage to somebody else’s property, injures people (crew, passengers or others), or causes pollution or environmental damage.

Why important: Hull insurance often covers physical damage but not full liability. P&I covers gaps.

Example: An oil tanker leaks, polluting a shoreline. The tanker’s owner may be legally obligated to clean up and pay damages. P&I helps cover those costs.

Open Policies, Time Policies, Voyage Policies, Other Specialized Covers

Voyage policy: covers the insured for a particular trip, from a start port to the destination.
Time policy: covers risk over a period (for example one year). If the vessel is in service or cargo is moved during that period, it is covered.
Open policy (or floating policy): covers many shipments over time under one master policy. Useful for companies importing many items.
Port risk / War & Strikes / Riot cover / Other extensions: because sometimes extra risks are outside normal perils (e.g. war, terrorism, riots). If required, these extensions are added.

How Marine Insurance Works in Nigeria: Step by Step Guide

If you want to buy marine insurance or understand what happens, here is how the process generally works in Nigeria.

Step 1: Identify Your Risk & What You Need

You or your business must ask:

What goods or vessel do I want to insure?
What route will be used? (Which ports, seas, rivers)
What kinds of risks are likely? (storms, piracy, customs delays, theft, etc.)
How long will the voyage or period be?
What value? (What is the worth of the cargo or vessel)

Step 2: Choose the Type of Policy & Clause

Based on your risk, choose:

Cargo vs Hull vs Freight vs Liability etc.
Which clause (All Risk or Named Perils etc)
Whether time policy, voyage policy, open cover, etc.

Step 3: Find a Good Nigerian Insurer / Broker

Make sure:

They are licensed by NAICOM (National Insurance Commission).
They understand marine insurance.
They offer claims handling and have good reputation.
Step 4: Prepare and Submit Information

You will need to provide:

Value of cargo or vessel
Description of cargo or ship (type, condition, age, port state)
Voyage details (ports, transit times)
Mode of transit (sea, air, land, combinations)
Certificates like seaworthiness for vessel hull; packaging standards for cargo.

Step 5: Pay Premium

The insurer calculates premium based on:

Value insured
Perils / risks (how dangerous the route is, history of losses)
Type of clause & level of cover
Extensions (war, strikes, etc.)
Deductibles or excess (amount you will pay before insurer pays).

Step 6: During the Transit / Period

You must:

Take care of the goods or ship reasonably (good packaging, navigation, maintenance).
Report any incidents or damage immediately to insurer or broker.
Preserve evidence: photos, survey reports, bills of lading, invoices.

Step 7: Making a Claim

If something goes wrong:

Notify the insurer as soon as possible.
Submit claim form + supporting documents (proof of loss/damage, invoices, surveyors’ report, bills, evidence).
Insurer (or appointed surveyor) investigates.
If all is in order, insurer pays the indemnity (minus any excess).

Step 8: Settlement & After‑Claim

Agreement on amount.
Payment might be partial or full.
Sometimes disputes arise if cause of damage is not clear; then legal or arbitration steps may happen.

Regulatory & Legal Framework in Nigeria

It’s important to know the laws, rules and regulators that affect marine insurance in Nigeria.

Key Laws, Acts & Requirements

Insurance Act (Nigeria): regulates insurance generally; insurers must meet requirements of capital, licensing.
Marine Insurance Act: specific to marine insurance; defines contract, principles etc. (Often heavily influenced by older UK law)
NIMASA (Nigerian Maritime Administration and Safety Agency): oversees maritime operations, safety of ships, operations in port, etc. It also has role in ensuring compliance.
NAICOM (National Insurance Commission): regulates insurance companies, brokers, ensures ethical practice, financial strength of insurers.

Compliance Requirements

Any import cargo must be insured by a Nigerian registered insurer.
Certificates of insurance often needed at customs or port. Without them, fines or delays may occur.
Insurers must have certain capital, solvency, reporting to NAICOM.

Advantages & Disadvantages of Marine Insurance in Nigeria

To make a wise decision, let’s weigh the pros and cons.

Advantages

Financial Protection: Avoid heavy losses from cargo loss, ship damage, liabilities.
Business Continuity: Helps businesses stay afloat even when accidents happen.
Legal & Regulatory Compliance: Helps you meet laws; avoid fines, delays at customs or ports.
Trust & Reputation: If you insure your goods, partners and customers trust you more.
Risk Sharing: Insurance spreads risk from you to many (insurers) so one big loss doesn’t ruin you.

Disadvantages / Challenges

Cost / Premium: Covers cost money; high risk routes or values mean high premiums.
Exclusions: Not all risks are covered; some perils are excluded unless you pay extra.
Claims Delays: Sometimes insurers or brokers delay assessing or paying claims.
Lack of Awareness: Many importers or smaller businesses do not understand marine insurance well. They may under‑insure or use fake certificates.
Fraud / Fake Policies: There are fake insurance agents who issue fake certificates. Customs and regulatory bodies sometimes find this problem.

Comparisons: Marine Insurance vs Other Insurance Types

Sometimes people confuse marine insurance with other insurance types. Let’s compare.

Feature	Marine Insurance	Cargo/Transit Insurance	General Property Insurance	Vehicle Insurance
What it insures	sea transit, ships, cargo, port & marine liabilities	goods during transit (may include sea, land)	buildings, land, assets on land	cars, trucks etc
Risks covered	perils of sea, water damage, collision, piracy, port risks etc	damage during movement, theft, handling etc	fire, theft, natural disasters etc	accidents, theft, damage on road
Clauses / special terms	institute clauses A, B, C; hull & machinery; P&I; voyage & time policies	often shorter, may use Named Perils	standard property policies	motor insurance acts & repair clauses
Key regulators	NAICOM, NIMASA, Marine Insurance Act etc	NAICOM & possibly customs/regulation	NAICOM	Motor vehicle laws + NAICOM
Premium calculations	complex (value, route, type of vessel, nature of cargo, etc)	somewhat simpler but still depends on route & goods type	standard risks	engine size, driver experience etc

Examples of Marine Insurance in Nigeria (Real‑Life Situations)

Here are some practical examples to help you understand how marine insurance works in Nigeria.

Example 1: Importing Agricultural Goods

A small business in Port Harcourt imports 100 tons of rice from India. The rice is shipped by sea to Lagos port, then transported by road inland. On the way, the rice bagges get water damage due to a storm at sea and poor packaging.

If the business had a Cargo Insurance under Clause A (All Risks) it would cover water damage (except if packaging was clearly substandard when declared).
They would contact the insurer, show invoices, bills of lading, photos, etc.
The insurer investigates, pays compensation for value minus any deductible.

Example 2: Damage to a Vessel’s Hull

A fishing company uses a boat that operates on coastal waters. The engine room is flooded due to a severe storm and some machinery is damaged.

If they have Hull Insurance, they can make a claim for repair of hull and machinery.
They must produce proof of seaworthiness, show maintenance records, report quickly to insurer.

Example 3: Liability Case

A cargo ship under Nigerian flag collides with a local pier in a port and damages the pier wall. Also some cargo falls and injures workers.

The shipowner will likely have to pay for damage to pier, compensation to injured persons.
With P&I / liability insurance, these costs can be covered (depending on policy).

How Much Does Marine Insurance Cost? What Affects the Price

Several factors affect how much you will pay for marine insurance in Nigeria. Here are the main ones:

Value of the Goods or Vessel: Higher value means higher premium.
Type of Coverage / Clause: All‑risk covers more perils and costs more. Named perils, restricted cover cost less.
Route & Duration: Longer voyages, dangerous seas, piracy zones, rough weather = higher risk => higher cost.
Packaging & Handling: If you pack goods well, use good containers, reduce risk of damage, premiums are lower.
Condition of Ship or Cargo: Age of vessel, condition, maintenance history affects hull premium. For cargo: perishability, fragility matter.
Extensions & Add‑ons: Extras like war risks, strikes, piracy, war & civil commotion cost extra.
Deductibles / Excess: If you agree to bear some loss yourself before insurer pays, premium is lower.

In Nigeria, marine cargo insurance premiums may be in range like 0.3% to 1% of the value under Clause A, less under more limited clauses.

Challenges Facing Marine Insurance in Nigeria

While marine insurance has benefits, there are also hurdles specific to Nigeria.

Low Awareness & Education

Many traders, importers, small businesses do not fully understand marine insurance, its legal requirement, or how to claim properly. This leads to under‑insurance or ignoring insurance.

Fake Policies & Certificate Fraud

Some importers use fake certificates to avoid paying legal premiums or just through ignorance or because they are misled. Customs and ports sometimes detect this.

Cost and High Premiums

Especially for risky routes, or high value goods or vessels in bad condition, premiums can be expensive. Some smaller businesses can’t afford.

Claims Process Delays and Disputes

Because investigations require surveyors, proof, sometimes court or arbitration, claims can take long. Disputes over what caused damage (proximate cause) may delay or reduce payout.

Regulatory Weaknesses

Even though laws exist, enforcement is sometimes weak. Some people skip using registered insurers. Some delays in regulation or corruption can happen.

Recommendations: How to Get Good Marine Insurance in Nigeria

To get the most from marine insurance, here are some best practices.

Work with Registered, Reputable Insurers or Brokers: Ask for proof of registration/licensing, reviews, track record of claims.
Be Transparent and Accurate: Disclose all material information – value, route, cargo type, condition – so the policy is valid.
Choose the Right Clause: If goods are expensive or fragile, use All Risk; for cheaper or less risky goods, Named Perils might suffice.
Proper Packaging and Handling: Good packaging, proper shipping containers, safe loading/unloading reduce risk and may reduce premium.
Document Everything: Bills of lading, invoice, photos, condition at each stage. In damage, preserve evidence.
Understand Terms and Exclusions: Why something may not be covered (war, delay, negligence, inherent defects etc.).
Regular Review: If your shipping routes, goods type or values change, update your policy.

Summary Table: Marine Insurance Key Features at a Glance

Element	What It Covers / Means	Good to Know / Example
Policy Type	Hull / Cargo / Freight / Liability / P&I etc	Choose depending on whether you own a ship or are importing goods
Clauses	All Risks (Clause A) vs Named Perils (Clause C etc)	All Risks cost more but cover more; Named Perils cheaper but limited
Duration	Voyage policy vs Time policy vs Open policy	Voyage: one trip; Time: period; Open: multiple shipments
Value	Actual value to be insured; agreed value or assessed later	Important for correct indemnity
Premium	Based on value, route, risk, type of clause, age of vessel etc	Get quotes, compare insurers
Exclusions	Specific things not covered: delay, bad packaging, war unless added etc	Read the fine print
Claim Process	Notification, proof, surveyors, settlement	Prepare all documents; act fast
Regulator	NAICOM, NIMASA, relevant laws	Use registered firms; avoid fake ones
Benefits	Financial protection, compliance, peace of mind	Helps avoid big losses
Risks	Cost, delays, disputes, fake insurance	Be cautious; use reputable providers

Frequently Asked Questions (FAQs)

Here are answers to common questions about marine insurance in Nigeria.

What is the difference between all‑risk vs named perils (restricted) cargo insurance?
All‑risk cover (Clause A) protects the cargo against almost all possible types of damage or loss except what’s explicitly excluded (like war, negligence, etc.). Named perils cover (Clause C or similar) only protects against specific risks listed in the policy (e.g. fire, sinking, collision). Named perils cost less but you may find your damage isn’t covered if the cause isn’t named.
Do I have to insure every import in Nigeria?
Yes, by law, many imports must have insurance from a Nigerian registered insurer. Customs often require insurance evidence before clearing goods. Some people ignore it or use fake certificates, but that has risks (fines, loss). ibn.com.ng+1
What happens if I use a fake or invalid insurance certificate?
Customs may reject it; you may pay fines; your goods could be held; you may have no real protection if loss happens. Always use legitimate, registered insurers.
How do insurers decide premium in Nigeria?
Factors include: the value of goods or ship; the route (distance, danger); condition of ship or packaging; type of clause (all‑risk or named); presence of additional risks (war, piracy, strikes); duration; deductibles.
Can I insure goods from when they are still in the factory abroad until delivery in Nigeria?
Yes. Many marine cargo policies cover from factory or warehouse abroad, through sea freight, unloading, inland transit to final destination in Nigeria. Check if policy includes “warehouse to warehouse” or similar terms.
What are common exclusions?
Common exclusions: delay in delivery, inherent defects of goods, bad packaging or preparation, wear & tear, war or political risks unless added, negligence in maintenance, certain natural disasters unless specified.
What is P&I insurance and how is it different from hull insurance?
Hull insurance protects the ship vessel itself (its structure, machinery). P&I (Protection & Indemnity) covers legal liabilities arising from owning or operating the ship: damage to third parties, pollution, injuries. P&I is a separate cover / extension.
How long does claim settlement take?
It depends: the insurer’s efficiency; how soon you report; how complete the documentation is; whether surveyors are needed; whether there are disagreements. It could be weeks to months.
Is marine insurance expensive in Nigeria?
It can be, depending on risk. If route is risky; items are fragile; vessel is old; you want full cover; then premium is higher. But for safer goods, standard routes, good packaging, Named Perils etc, cost is lower.
Can I insure only part of the cargo or ship?
Yes. You can choose partial cover, choose higher deductibles (you handle smaller losses), exclude certain perils, or insure only selected voyages or parts.
What happens if multiple insurance policies cover the same cargo?
Then the principle of contribution often applies: insurers share the loss in proportion to their policies, and you cannot claim more than actual loss.
What if the loss is due to more than one cause (one covered, one not)?
Then proximate cause becomes important. The closest, dominant cause is used to decide whether loss is covered. If one cause is excluded, insurer may deny or reduce claim.

Conclusion

Marine insurance is an essential tool in Nigeria for protection of ships, goods in transit, and the liabilities that come with maritime trade. It helps reduce risk, meets legal requirements, and secures businesses and investments. But it also has costs, exclusions, and requires careful choosing of insurer, policy, and terms.

If you are a student, a cargo owner, shipowner or anyone involved in import/export or shipping, understanding marine insurance will help you make good decisions, avoid surprises, and ensure that if things go wrong, you are protected.