It is an incontrovertible fact that Ghana’s international trade is mainly seaborne. Cargoes such as dry bulk cargoes, liquid bulk cargoes, break bulk cargoes (which since the late 1960’s, it has become more common for such cargoes to be unitised) containerised cargoes are all carried by sea in container vessels, multi-purpose cargo vessels, refrigerated ships, bulk carriers, obo carriers, ro-ro ships, crude oil tankers and liquified gas carriers. Invariably, marine policies are taken out to protect the owners of various interests against losses and damage from perils insured against.
The insurance industry in Ghana is regulated by the National Insurance Commission. The commission is set up by the Insurance Act of 2021 (Act 1061). This Act repealed the Insurance Act 2006 (Act 724). Act 724 introduced some innovations in respect of insurance of goods in relation to Ghana’s international trade. This article will examine some of the major changes made by Act 1061, and will consider to what extent the provisions of Act 1061 in respect of Ghana’s international trade represent an improvement on its predecessors.
For the purpose of this article, this writer deems it expedient to set out in extenso sections 37 and 38 of the repealed Act as this will conduce to a better understanding of the issues to be raised by the present writer in respect of the provisions in Act 1061 with regard to Ghana’s international trade.
Section 37 is captioned: ‘Restriction on Contract with Offshore insurer’, and stipulates as follows:
- “Unless authorised by the Commission, a person shall not enter into a contract of insurance with an offshore insurer in respect of –
- property situate in the country;
- liabilities arising in the country;
- goods, other than personal effects, being imported into the country.
- A person who contravenes subsection (1) commits an offence.
- Nothing in this section affects the validity or enforceability of a contract of insurance entered into in breach of subsection (1).
- This section does not apply to an insurer that enters into a reinsurance contract with an offshore insurer where the reinsurance contract:
- is entered into in accordance with reinsurance arrangements approved by the Commission under section 53 (1), or
- is exempted from approval by the Commission under section 53 (2)” “.
Section 38 of the Act is captioned ‘Authorisation to enter into contract of insurance with offshore insurer’ and is as follows:
- “A person may apply to the Commission, or through an intermediary, for authorisation to enter into a contract of insurance of a type specified in section 37 (1) with an offshore insurer.
- The Commission may authorise the applicant to enter into a contract of insurance with an offshore insurer in respect of that risk subject to such conditions as the Commission considers appropriate.
- In determining whether to grant an authorisation under subsection (2), the Commission shall have regard to the local capacity available to insure the risk in respect of which the application is made.
- Where the Commission issues an authorisation under subsection (2), the offshore insurer is considered not to be in breach of section 36.
- A person who is issued an authorisation under subsection (2) shall pay a premium to be determined by the Commission”.
It is pertinent to observe that this was the first time such innovatory provisions were introduced by our insurance legislation. PNDC Law 227, which was repealed by Act 724, was silent on such provisions. Even though the provisions in Act 724, quoted supra, were not a blanket ban in respect of insuring with an offshore insurer with regard to the importation of commercial goods into the country, the philosophy underlapping the provisions was quite laudable. The provisions were to ensure that financial capacity of insurance companies licensed under the Act were on firm footing.
In 2021, to be precise, on 5th January 2021, Act 1061 was gazetted. The Act repealed the Act 2006 (Act 724). Act 1061 has copious provisions which impact on Ghana’s international trade. The ramifications of these provisions will be dissected by this writer. As was done in respect of Act 724, this writer wishes to set out in extenso the provisions of Act 1061 which impinge on Ghana’s international trade. The pertinent sections are sections 221 and 222.
Section 221 is captioned: ‘Insurance for risk arising in Ghana’, and stipulates as follows:
- “A person shall not, unless authorised by the Commission, enter into a contract of insurance with an insurance company not licensed under this Act in respect of :
- a property situated in the country;
- liability arising in the country; or
- goods other than personal effects being imported into the country
- A person who contravenes subsection (1) commits an offence and is liable on summary conviction to a fine, for a term of imprisonment or both as specified in First Schedule.
- Nothing in this section affects the validity or enforceability of a contract of insurance entered into in contravention of this provision.
By way of comment, this writer wishes to observe the provisions of Section 221 quoted supra are almost inpari–materia with section 37 of Act 724 except that the drafting style has changed and penalties have been introduced.
Section 222 captioned: ‘Marine Insurance’ stipulates as follows:
- “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 a 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 subsections (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 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”.
Without doubt, section 222 of the Act has pervasive ramifications for Ghana’s international trade and this writer intends to analyse the section critically.
This writer has no qualms about subsection (1), and wishes to observe that the purpose of the section is to build the financial capacity of insurers licensed under the Act and to conserve foreign exchange. The sum total of the sub-section is that importation of goods into the country other than personal effects must be on C & F basis.
Sub-section (2), however, bristles with some difficulties.
In the first place, the drafting of the sub-section, with the greatest deference to the drafters of the Act, is inelegant and the full import of the sub-section was not, perhaps, appreciated fully by them. What is meant by ‘marine cargo’ referred to in the sub-section? This writer is of the view that the rendition should have been ‘take out a marine policy on cargo’.
The second issue is with ‘hull business’. The appropriate terminology used world-wide in marine insurance is ‘hull ad machinery insurance’. This writer is at a loss to appreciate the import of placing “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”. Is it this writer’s understanding that any ship, whether registered in Ghana or not, which carries commercial cargo to Ghana must be insured in Ghana? The second issue is, how can the commission enforce this provision? Probably, the commission, with the greatest respect, must take a second look at sub-section (2) because the sub-section as it stands now will be honoured more in breach than in observance, and it militates against smooth operation of Ghana’s international trade.
Sub-section (3) is a novelty. No mention was made of letters of credit in Act 724 and the commission must be commended for this novelty. However, the terminology ‘prime cost, insurance and freight’ is alien to international trade. The appropriate special trade term is Cost, Insurance and Freight.
On this point, this writer will refer to Professor David Sasson’s magnum-opus on CIF and FOB Contracts, which is published under the British Shipping Law Series, and which has become a practitioner’s vade mecum in this area of law. In addition to Prof. Sasson’s book, ‘Benjamin on Sale of Goods’, which is published under the Common Law Library Series, also uses the term Cost, Insurance and Freight. In addition to the above authorities, ‘Carver on Bills of Lading’, which is also published under the British Shipping Law Series, adopts the term Cost, Insurance and Freight.
In addition to the above authorities, the Official Rules for the Interpretation of Trade Terms (Incoterms 2020) adopts the term Cost, Insurance and Freight. Further support for the position being canvassed by this writer can also be found in the current Uniform Customs and Practice for Documentary Credits (UCP 600), which is adopted by banks world-wide in respect of Letters of Credit.
Before this writer concludes his observations on section 222 of the Act, he will refer again to a portion of sub-section (3) which stipulates as follows: “For the purpose of sub-sections (1) and (2), a letter of credit or a similar document issued by a bank or financial institution…”
With the greatest respect to the drafters of the Act, life would be easier for judges confronted with the interpretation of this portion of the provisions of sub-section (3) if the rendition had been “letters of credit, bills of exchange, promissory notes, cheques or other similar documents used for obtaining the payment of money”.
As already observed, despite the shortcomings in the drafting of section 222, the rationale behind the section is highly commendable since it will build financial capacity of insurers licensed under the Act. In addition to this, it will conserve foreign exchange for Ghana. The problem, however, lies with the enforcement of the provisions of the section. Perhaps, the National Insurance Commission must work in tandem with the Bank of Ghana to ensure that the provisions of the section are scrupulously complied with.
The Bank of Ghana is the regulatory body of banks and other financial institutions in the country, and perhaps a circular addressed to all banks and other financial institutions drawing attention to the provisions of Act 1061 referred to supra will be a step in the right direction.
The writer is a Legal Practitioner. His email address is [email protected].