Restrictive transport insurance practices

Nature

Some governments that are anxious to expand all sectors of their economy attempt to defend their insurance market by restricting the trader's freedom of choice in the placing of transport insurance. This is done by requiring the buyer or seller to insure his imports in the country of importation or his exports in the country of exportation; by imposing discriminatory taxes on marine insurance placed with foreign companies; or by the operation of their import licensing and exchange control regulations. In so doing, governments overlook the fact that insurance, more than any other transaction, is based on confidence and is thus incompatible with any form of coercion. When insurance affects international transactions, then the need for confidence is all the greater.

Transport insurance of goods has all the elements of an international transaction. The goods themselves move from one country to another, frequently on the high seas. The supplier is in one country, the buyer in another and the carrier may belong to a third country. Consequently, restrictive measures affecting transport insurance inevitably have a direct effect on international trade. It is therefore international trade as a whole which suffers from restrictive measures imposed in relation to transport insurance; and the economy of the country which imposes them loses the benefits to be derived from a free choice of the transport insurance arrangements. If, furthermore, other countries adopt a similar attitude in retaliation, this leads to the paradoxical situation where no commercial transaction remains possible between two countries without violating the law of one or the other.

Background

The global significance of restrictive transport insurance practices emerged in the mid-20th century, as international trade expanded and disparities in insurance requirements became apparent. Early concerns were raised by exporters and developing nations facing prohibitive costs and limited access to coverage. Subsequent international forums, such as UNCTAD conferences in the 1970s, highlighted how such practices impeded equitable trade, prompting ongoing scrutiny and calls for harmonization within the global transport insurance sector.

Incidence

Restrictive transport insurance practices have significant global implications, affecting the movement of goods across international borders and increasing costs for exporters, importers, and logistics providers. These practices often result in limited coverage, high premiums, and exclusion of certain routes or cargo types, disproportionately impacting developing economies and small businesses. The resulting inefficiencies hinder global trade, delay shipments, and create barriers to market access, with ripple effects on supply chains and economic development worldwide.
In 2022, exporters in Nigeria faced severe delays and financial losses when several international insurers refused to cover shipments passing through the Gulf of Guinea, citing heightened piracy risks. This restriction forced businesses to seek alternative, more expensive insurance options or reroute shipments, exacerbating trade bottlenecks and increasing operational costs.

Claim

It is not so much the relatively small amounts of money involved in relation to the business turnover as the burden of business complications and administrative vexation resulting from such restrictions in the field of transport insurance which constitute the undeniable harm done to international trade; the role of transport insurance should be to facilitate and not to impede the flow of trade.

Counter-claim

Restrictive transport insurance practices are hardly a pressing issue. In fact, they serve to maintain industry standards and protect both insurers and clients from unnecessary risk. The supposed “problem” is vastly overstated; most customers can easily find suitable coverage if they shop around. Energy and resources would be better spent addressing genuinely critical concerns in the transport sector, rather than fixating on a non-issue manufactured by a vocal minority.