An examination of arguments against the enforcement of local marine insurance cover

By  Stanley R. K. AHORLU

The Minister of Finance issued a directive in January this year instructing the enforcement of Section 222 of the Insurance Act, 2021 (Act 1061).  That law stipulates that all merchandise imports into the country must be insured in Ghana.  Not long after the directive came into force, on the 1^st of February 2026 it was greeted with vehement opposition from some trade associations who called for its immediate revocation to allow for exhaustive stakeholder consultations among other reasons.

In issuing the directive, the Minister was quick to point out that it was predicated on existing law – section 222 of the Insurance Act, 2021. That section of the Act specifically states that:

• A person who imports goods, other than personal effects, into the country shall insure the goods with an insurer licensed under this Act.
• A person shall not place any marine cargo or hull business, other than reinsurance business, with an insurer who is not licensed under this Act, except with the prior written approval of the Commission.
• For the purposes of subsection (1) and (2), a letter of credit or similar document issued by a bank or financial institution
• in the country, in respect of the goods being imported into the country, shall be on prime cost, insurance and freight with the insurance taken from an insurer licensed under this Act; or
• outside the country, in respect of the goods being imported into the country, shall be on cost and freight.
• A person who contravenes subsection (1) or (2) commits an offence and is liable on summary conviction to a fine or a term of imprisonment or to both as specified in the First Schedule.

The Minister further directed that the enforcement of the law be implemented by the Ministry of Finance in collaboration with the Ghana Revenue Authority (GRA) and the National Insurance Commission (NIC).  Undoubtedly from a legal standpoint, the Minister is legitimately placed and within his executive powers to issue administrative instructions and guidance as to when and how that particular provision of a binding Act of Parliament should be enforced. Accordingly, the Minister also instructed the GRA to:

• Confirm valid local marine cargo insurance for all applicable imports through GRA’s Integrated Customs Management System (ICUMS) with the NIC’s Marine and Aviation Database (MAD).
• Ensure that no commercial import is cleared without the evidence of a local insurance cover issued by a company duly licensed by the NIC.
• Designate focal officers to constitute a working group with the NIC to streamline implementation.

Again, in furtherance of his enforcement policy, the Minister announced that the Bank of Ghana has already instructed all banks in Ghana to confirm valid local marine cargo insurance for all applicable imports prior to issuing letters of credit (LC) to applicable importers.

All put together, as of the 1^st of February this year, all imported merchandise into Ghana must be insured against marine perils by a local insurer. In addition, all marine insurance (cargo and hull), except reinsurance business, must be placed with an insurer licensed under the Act unless an exemption is sought and granted by the Commissioner. This requirement of the law anticipates an initial period of strain on local capacity due to the likely surge in demand for marine cargo insurance, and therefore, an expansion of the local market by new entrants.

To aid enforcement, banks engaged in issuing documentary credits in favour of sellers of commercial imports into Ghana are required to extend those credits to overseas sellers such that the marine insurance cover for the cargo sold is placed with a local insurer. As such, a local bank issuing an LC in favour of a foreign seller of imports into Ghana must do so on cost and freight (C&F) terms only. This is because the insurance is presumed to have been procured locally by the buyer instructing the LC. In the case of a local bank, the LC is required to be issued in favour of the overseas seller on cost, insurance and freight (CIF) terms on condition that the insurance cover is placed with an insurer licensed under the Act.

In justification of the directive, the Minister explained that “the policy aims to provide adequate protection for shippers, retain foreign exchange locally, and support domestic insurers.” He reasoned that because “Ghana’s economy has stabilized and returned to a path of inclusive growth this should enable industry players to expand market reach, improve risk coverage and support productive economic activity.”

If the Minister’s directive is carried out successfully, Ghana could potentially realize and retain between 100 million – 200 million USD in cargo insurance premiums annually. According to United Nations Conference on Trade and Development’s (UNCTAD) published Maritime Profile of Ghana, the value of Ghana’s total merchandise imports for 2024 stood at 27 billion USD. In international trade, marine cargo insurance typically accounts for about 0.3% to 1% of the CIF value of the cargo, depending upon the route risk profile of the cargo. Currently, the local insurance market appears to be charging, on average, 0.3% of the CIF value as premium on marine cargo cover. With a minimum of 100 million USD in potential insurance premiums (constituting about 0.2% of annual GDP) to be retained in-country in addition to prospective new industry job opportunities, and the enhancement of existing government tax revenue collection measures, the enforcement of the compulsory marine cargo insurance law now appears irreversible.

However, as already indicated, some prominent local trade associations have expressed their concerns and raised quite a few arguments strongly in opposition to the implementation of the ministerial directive. Some of the arguments against the enforcement of the ministerial directive on the following grounds:

“1. The business community cannot be coerced into purchasing insurance services. This undermines the principles of free market economics.

2. Instead of relying on regulatory fiat, local insurance companies should focus on making their services attractive to gain patronage from the business community.
3. Stakeholder consultations on this policy have not been exhaustive or conclusive.
4. Our suppliers often have insurable interest in imported goods due to credit arrangements and should be allowed to maintain their existing insurance arrangements.
5. Suppliers typically have preferred insurance companies and terms, which should be respected.
6. It is morally wrong to punish businesses for not insuring locally, especially when local insurers haven’t demonstrated sufficient capacity or competitiveness.
7. Questions the capacity, experience, and affordability of local insurance companies, given their lack of patronage from Ghanaian businesses.”

Based on the above assertions, it is being demanded that “the relevant authorities immediately halt implementation and engage stakeholders meaningfully to address their concerns.”  These concerns raise a few interesting questions necessitating a discourse.

As a preliminary point, it may prove a herculean task for any citizen or group of citizens to successfully justify preventing or truncating the enforcement of pre-existing law on grounds of lack consultation or notification.  Especially, where the legislation in question imposes obligations with criminal consequences if breached. Not to mention that simply neglecting to enforce the law may, under the proper circumstances, ground a claim against a state actor for breach of statutory duty.

In any event, the specific provision of the law informing the Minister’s directive has been in force since 2006. The antecedent of Section 222 of the Insurance Act, 2021 (Act 1061) was the Insurance Act, 2006 (Act 724). Section 37 (1) (c) of Act 724 made it an offence for any person unless permitted by the Commission, to enter into a contract of insurance with an offshore insurer in respect of goods, other than personal effects, being imported into the country. It is upon the basis of Act 724 that the GRA has since exacted a 1% penalty on the CIF value of all offshore insured merchandise imports into Ghana to date. Practically speaking, therefore, the enforcement of the prohibition against insuring merchandise imports offshore dated back to 2006, albeit not in the comprehensive way now proposed by the Minister’s directive under Act 1061.

Therefore, the consultation of stakeholders before enforcement argument lacks strength. Perhaps, a more logical approach is to argue for the repeal of the underlying legislation. That said, one cannot feign ignorance of the effect of the accusatory refrain – lack of stakeholder consultation – on political actors and policy makers. It has been the cause of many a policy roll-back.

To thoroughly examine the more substantive concerns, it might prove useful, at this point, to remind ourselves of a few of the general principles and norms underpinning marine cargo insurance practice and law.

Generally, marine cargo insurance involves the exchange of contractual undertakings between the assured and the underwriter, resulting in a commitment by the underwriter or insurance company to pay the specific sum insured if the risk or peril insured against causes loss or damage to the cargo, and the assured commits to the payment of the premium. These commitments are contained in the insurance policy.

In the event of such loss or damage, the assured can only successfully recover the sum insured if he has an insurable interest in the subject matter of the insurance – in our specific case, the cargo. In other words, the assured must be interested in the preservation of the cargo during its carriage by sea such that he benefits when the cargo is delivered at its intended destination intact, or he is prejudiced from its loss or damage.

It is in the light of that foundational concept of insurable interest that one needs to carefully examine the assertion that overseas suppliers often have insurable interest in imported goods due to credit arrangements with local buyers and should therefore be allowed to procure cargo insurance from foreign insurance companies for goods imported into Ghana.

The established legal position is that a creditor has no insurable interest in goods supplied on credit. Whether or not the goods suffer loss or damage during transit would not negate the supplier’s right to payment from the buyer to whom he extended credit. Such a supplier is considered to have no interest in the marine adventure and therefore cannot be prejudiced by its failure.  A supplier/creditor is expected to protect himself by non-marine insurance, namely a credit insurance policy to insure against the risk of non-payment of the debt. Better still, he should demand from the buyer under the underlying contract of sale, an assurance payment by means of a documentary credit such as an LC issued by a third party bank.

In any event, under international (import/export) trade norms and relevant common law legal principles, where goods are sold under CIF or C&F terms, the risk of loss or damage to the goods passes on shipment or as from shipment, but possession does not pass until the documents which represent the goods are handed over in exchange for the price. Part of the buyer’s duty is to bear all the risks of the goods from the time when they shall have effectively passed the ship’s rail at the port of shipment.

The result being, the buyer, after receipt of the documents (bills of lading, commercial invoice, insurance policy) can claim against the ship for breach of the contract of carriage and against the insurers for any loss covered by the policy. Ordinarily, a seller would wish to part with the right of disposal of the goods only against payment of the purchase price and not be answerable for loss of or damage to the goods during the voyage. It is in that sense that the CIF contract has been described as a contract in which the seller discharges his obligations as regards delivery by tendering a bill of lading covering the goods.

Under these principles and norms of the trade, therefore, a seller or supplier of commercial goods imported into Ghana has no insurable interest in the goods shipped under CIF terms necessitating an insurance policy in his name, let alone one purchased offshore Ghana. Even where the Seller decides to retain ownership and constructive possession of the goods until he is paid at destination (Ghana) of the goods, his ownership and possessory interests will not be prejudiced by procuring insurance cover for the imported goods from a local Ghanaian insurer.

The trader associations argue, quite legitimately, that such a supplier or seller may be so advantaged in the market as to enjoy relatively favourable terms and discounts on premiums with specific offshore insurance companies, and therefore regularly passes on such advantages to his Ghanaian buyers.  However the Insurance Act anticipates that situation and so allows exemptions to be obtained by an importer from the Commissioner and also, most preferably, allows an offshore insurer interested in the Ghanaian cargo insurance market to be licensed under the Act to operate in Ghana to the benefit of his pre-existing customers. That said, simply preferring particular offshore insurers to local insurers cannot be a good reason to halt the enforcement of existing law.

One key argument for halting the enforcement of the law is the assertion that “the business community cannot be coerced into purchasing insurance services. This undermines the principle of free market economics.” But that assertion is flawed in two significant ways. Firstly, the coercion assertion fails to acknowledge that the law is simply reflective of a standard practice in international seaborne trade where the insurance cover is an essential risk mitigation requirement of the trade. The only difference between international practice and the local law is the latter’s insistence that the marine insurance cover be placed locally.

Secondly, the argument that the law undermines free market economic principles fails to acknowledge governments’ generally accepted power of economic regulation of markets to ensure efficiency, fairness and safety, especially where competition alone is inadequate to achieve those desired goals.

In an import dependent economy such as ours, where not only are goods imported, but also the services incidental to transporting those imports are also bought offshore, it becomes a matter of public interest for government to set and enforce rules to address problems such as market failure, abuse of market power, capital flight, trade imbalances, and to protect local consumers and workers. Such economic regulation is not antithetical to the proper functioning of a free market system.

Notwithstanding the not entirely convincing arguments advanced by the trade associations in opposition to the enforcement of the law, some of the concerns they have raised are worth paying some attention to. The concerns around the competitiveness, capacity, and experience of local insurers in underwriting marine cargo risks need to be highlighted and addressed by the industry regulator.

The anecdotal evidence is that, on average, marine cargo insurance constitutes less than 2% of the total insurance portfolio of insurance policies currently underwritten by the local insurance companies, albeit one of the most profitable aspects of their business. That evidence speaks directly to the relatively low levels of experience in assessing marine cargo risks, underwriting those risks competitively, and administering claims. With the increase in demand expected from the enforcement of the law, attention must be paid by the industry to enhancement of knowledge and expertise on the workings and intricacies of the marine cargo insurance market.

Also to ensure competition and high standards of service, the National Insurance Commission will be expected to guard against the unintended negative consequences of the enforcement of the law, such as an oligopolistic market and the danger of local insurers acting as a cartel to the detriment of importers and traders.

These among others are the matters the Ghana Chamber of Shipping will further highlight and extensively discuss at its stakeholder forum to be held today, 10^th February 2026 at the Palms Airport City Hotel in Accra from 9.30am to 1.00pm.

The writer is  a maritime lawyer and entrepreneur. He is the president of the Ghana Chamber of Shipping and can be reached at [email protected]

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