New Telegraph

Aviation: Nigeria inches towards cheaper insurance premium

Improvement in infrastructure raises hope

Nigeria’s prohibitive insurance premium in the aviation sector may experience a dip soon following an aggressive infrastructure and safety-inclined improvement. Infrastructure decay, categorisation of airports in the country and particularly African nations as ‘unsafe’ and the perceived high rate of air accidents have continuously seen aircraft insurance premiums skyrocket.

 

However, the relative improvement in airport infrastructure, air traffic control management and the strict regulation by the Nigerian Civil Aviation Authority (NCAA) could see aircraft insurance premiums drop as insurance cover for aviation in Nigeria and, particularly Africa, is said to be astronomical.

 

Director, Policy and Regulation, National Insurance Commission (NAICOM), Mr. Leo Akah, argued that the rates they charge airlines were not derived from Nigeria, but from the same United Kingdom (UK) market, insisting that “I don’t know the basis for that.

 

He disclosed that the Commission would make a big policy statement on the matter in a few days time pertaining to insinuations that insurance firms would kill off Nigerian airline operators. According to him, “the Commission will make a pronouncement on this matter very shortly because we need to address it.

 

The Commission, as a body, will make pronouncements on it.” Chairman, Boff and Company Insurance Brokers Limited, Chief Babatunde Olatunde-Agbaje, who spoke to New Telegraph on the sidelines of Cargo and Export symposium otherwise known as Chinet 2021, an event that brought together a cross section of experts in aviation, cargo, insurance firms, banks, government and private sectors dismissed claims that Nigeria’s airspace is not safe and the reason insurance firms may have imposed higher premium on airline operators in Nigeria compared to their counterparts in Europe and the United States.

 

His words: “They categorised our airports as unsafe because of the outdated equipment we were using, but things are getting better.

 

There would always be accidents, even in developed world. It is the rate of the accidents that is a bit higher in Africa. “Anyone operating in Africa, they term it as riskier than operating in the developed world.

 

The rates in Africa are marginally higher, but it is not as if it is not affordable. It is affordable. It is a bit expensive, but you make it part of your operations.

 

As we get better continent-wise as per safety measures, the rates will come down.” Aviation insurance experts have cautioned that airline operators in Nigeria should stop benchmarking their premium rates with those of Nigerian neighbours such as South Africa, London and other western countries, arguing that safety culture in Nigeria is very poor when compared with those of other countries.

 

Although air safety is considerably improving in the continent but many are still not convinced about the assertion on the parameter that air traffic movement in Europe and other places tripling those in Africa, the continent still lacks behind these continents in air safety.

 

Africa recorded the second highest accident rate in the world in 2019, according to the International Air Transport Association (IATA).

The continent came second with 1.39 per cent jet hull loss rate in 2019 compared with 1.01 per cent in 2018 only to Commonwealth of Independent States comprising Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan with jet hull loss of 2.21 in 2019 as against 1.08 it recorded previous year.

 

A 2018 report available to our correspondent stated that eight  indigenous airlines in Nigeria, expend about N11 billion on aircraft and passengers’ insurance premiums annually, representing eight per cent of total value of each aircraft in their fleet.

The figure may have risen to more than N20 billion as a result of more airlines that have joined existing carriers. But their counterparts in Europe and America, expend a mere one per cent of aircraft cost as insurance premiums for airplanes and passengers.

 

This is as a result of huge volume of aircraft and other equipment for insurance, coupled with its huge market compared to Nigeria. The amount of money paid by Nigerian airlines is different from what business aviation – charter operators and private jet owners – pay as insurance premiums on their jets annually.

 

Eighty per cent of insurance premiums are carried out abroad with international insurance companies such as Lloyds of London, while the other 20 per cent is domiciled in Nigeria with local insurance firms who act as brokerage firms.

 

Some of the major foreign insurance firms Nigerian airlines insure their aircraft are Allianz Aviation Insurance, Aerospace Insurance and Lloyds of London.

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