Despite Nigeria’s low air crashes or serious incidents, insurance firms, particularly those based overseas, still charge the country’s airline operators high insurance premiums, a situation that was attributed to the bad rating of the continent’s airlines in terms of safety.
Speaking to Aviation Metric on the sidelines of two-day aviation, cargo, and export conference, tagged: “CHINET,’ held in Lagos, Director of Policy and Regulations at Nigerian Insurance Commission (NAICOM), Leo Akah, admitted that premium rates were usually raised any time there is a plane crash, stressing that though aviation risks are low, they are high in severity and require a strict legal framework and regulatory principles that operate in the insurance sector.
Akah lamented that Nigerian airline operators were finding it extremely difficult to pay their premium on their assets like aircraft and others, disclosing that many carriers are breaking it into bits, monthly, some quarterly, and other pieces.
His words: “Our law says no premium no cover and if you don’t pay, you are on your own. You can’t fly if you don’t have insurance. This is an issue. Even accessing foreign exchange to pay your insurance overseas is some of the challenges in the sector. The insurance company won’t collect Naira from you.
“It is not optional for you not to have insurance as an airline operator. If you don’t insure your liabilities for example you cannot fly. We liaise with the Nigerian Civil Aviation Authority (NCAA) to ensure that whatever paper is submitted to them at NCAA is evidence that you have insurance so that they can allow you to fly.”
The country had, in the recent past, experienced ugly experiences where reinsurance firms in the country had had to distance themselves from airlines any time there are issues of claims, especially during air crashes. The reasons according to experts who spoke at the forum were attributed to piecemeal payment of premium.
They cited issues with the crash of Sosoliso Flight 1145 of 2005, which did not have a full cover and one that lingered until the insurance firms in the country pooled resources together to save the situation because many of the victims of the accident were Nigerians.
Likewise, many foreign insurance firms are very reluctant to serve as insurers to Nigerian carriers because of default in renewing their premium or paying their premiums as when due.
The huge insurance premium is impacting significantly on the cost of operations of airlines, which are transferred to consumers.
Consequently, many aircraft owners prefer to register their airplanes outside the country to escape the high premiums they are likely to pay when the equipment is registered in Nigeria because of the high-risk tag they place in most African countries.
Chairman of Air Peace, Mr. Allen Onyema, had in 2017 admitted that the lack of capacity by Nigerian insurance firms to provide cover for airlines was one of the major crises bedeviling indigenous airlines, an allegation that the Managing Director of Cornerstone Insurance Plc, Mr. Ganiyu Musa, dismissed when reminded that Nigerian insurance firms lack the capacity and the huge portfolio to insure Nigerian airlines.
He disclosed that the total balance sheet of the insurance industry was more than $1 billion which is more than enough to cover the aviation industry in Nigeria.
Part of the issue according to him is the law that limits insurance companies from investing more than five percent of their funds which translates to $50 million for the aviation sector going to regulation.
Akah corroborated Musa’s position, stressing that the percentage of aviation insurance compared to the oil and gas sector is so small
“It is not a case of so much coming from aviation. We have local content law and we need to abide by local content law. The percentage of aviation insurance compared to the oil and gas sector is so small.