Stakeholders Call for Review of Aircraft Insurance Policy to End Duplication of Premium Payment

Chinedu Eze

Aviation stakeholders have called on the National Insurance Commission (NAICOM) to review its insurance policy in aviation so that airlines can pay single premium for the coverage of aircraft risks.

Currently, airlines pay double premium for some leased aircraft types because some lessors insist that certain international insurance companies must cover the risk for its leased aircraft in Nigeria, while NAICOM also insists that airlines must insure their aircraft locally in tandem with local content policy of the Federal Government.

In order to meet these two demands, airlines pay double premium, insuring such aircraft locally and at the same time insuring same aircraft with the international insurance companies recommended by the lessors.

Due to the high cost implication, airlines urge that there could be a concession; whereby NAICOM could waive local insurance for these particular aircraft types, while they insure the rest of their fleet with local insurers.

Stakeholders from both aviation and insurance sectors brainstormed over this existing policy during the Chinet AviaCargo 2024 conference held at the Marriot Hotel, Lagos at the weekend.

The Chief Executive Officer, Overland Airways, Captain Edward Boyo, called for the review of the aforementioned policy, remarking that such laws that made it compulsory for all aircraft types to be insured locally have become inimical to the aviation industry and therefore should be reviewed.

“Some of these rules, regulations and laws work against the industry they were made for. This is because the sentiments at the time they were made, the environment, economic environment, was different. If we look at comparative advantage of nations, we, Nigeria, do not have strength in capacity to produce aircraft.

“We do not have strength and the financial capacity to own aircraft. I think the aircraft that are wholly insured in Nigeria, without duress, are the aircraft that are financed by the local banking institutions. Now, the industry, the market, is restricted as of today by this insurance difficulty, the imposition of the fact that we have to insure our aircraft locally,” Boyo explained.

In his reaction, the Commissioner for Insurance and CEO, National Insurance Commission, Segun Ayo Omesehin, said that certain laws are made by a country to protect certain aspects of its economy, noting that the whole concept is to create local content to protect the economic interest of Nigeria.

“It is aimed at protecting the economic interest of that nation. And before I come to aviation, I will go to a slightly bigger one which is the local content policy that was announced for the Nigerian oil and gas sector. Prior to the enactment of that law, most of the oil majors in this country that were operating in Nigeria never believed there was anything good about Nigerians. As a matter of fact, crudes were imported from abroad to Africa, up to the point when we then had to wake up.

“Today, I can tell you, the insurance aspect of oil and gas business in Nigeria is done in the local markets. Yes, with the active support and backing of the international re-insurers. which typically happens in Lloyds and other established markets that give us backing. And we have done that successfully, “he said.

Lessors recognize Nigeria as high risk country with high insurance premium and because of that designation, lessors insist that aircraft they leased to Nigerian airlines are insured with reputable international insurance companies, especially wide-body aircraft types.

Nigerian airlines spend about $2 billion to insure their aircraft with local insurers annually.