Modeling shipping accidents economic loss and the compensation in Nigeria
Keywords:Compensation, Shipping accidents, Economic loss, Claims, Marine insurance
The arbitrary reservation of between 25 and 45 % of premium revenue as funds for the compensation of insured unexpired marine risks by underwriters in Nigeria, in line with local insurance regulations, has created a problem of financial insolvency, making it impossible for underwriters to provide timely and adequate compensation for insured shipping risks. The aim of the study is to overcome this challenge by formulating models based on the coefficient of elasticity of the relationships between shipping accident economic loss, the value of seaborne trade, and compensation funds maintained for insured shipping risks. 21 years of time series data from 1999 and 2019 were obtained from secondary sources. Log-log constant elasticity model was used to analyze the data. The results indicate that, for each 1 % increase in shipping accident economic loss, compensation funds maintained for shipping accident economic risks increase by 0.364 %. The policy implications are discussed and models developed for the reservation of funds for sustainable compensation of insured shipping risks are developed.
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