Insurance premiums paid on aircraft, especially the wide-body type, are decreasing due to a new perception of Nigeria’s safety records. Safety records so far achieved by the country in the last couple of years had brought the insurance premiums on wide-body aircraft from $800,000 a year to between $150,000 and $200,000.
Aviation insurance caters specially to the operation of aircraft, as well as all the risks involved. Before now, Nigeria’s insurance premium on aircraft is recognised as the highest in West Africa. Over the years, Nigerian airlines have seen their insurance costs surge above what their peers in Ghana, South Africa and other African countries pay to insure their aircraft.
THEWILL gathered that the perception of Nigeria as a high-risk environment and the high insurance premiums demanded by local insurance firms had always made local operators pay higher while insuring their aircraft. Nigerian airlines pay between 8 percent and 10 percent of the value of an aircraft to insure it, just as airlines operating in Ghana, South Africa and other African countries pay 2 or 3 percent.
Airlines operating in Europe and the United States pay between 0.5 percent and one percent to insure the same aircraft.
For instance, airlines operating in Nigeria pay an average of $1 million annually to insure a B737-300 aircraft while airlines in Ghana or US pay between $200,000 and $300,000 to insure the same aircraft type. Added to this, is the fact that every aircraft parked at the ramp of any airport is guarded by security operatives at the expense of the airlines and this is added to the cost of operation and cost of leasing, especially wet leased aircraft.
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Insurance is therefore, very important in aviation as the latter is regarded as a strategic industry, not only because of its potential for economic growth but also for its crucial role in national development and regional integration.
In Nigeria for instance, indigenous airlines are faced with enormous challenges in the forms of high insurance premium, multiple taxes, forex issues, high cost of Jet A1 and disadvantageous policies, among others. Nonetheless, aviation insurance has now become one of the largest sub-sectors in the global insurance market.
Operationally, insurance is vital because, accidents and even incidents do occur sometimes. For example, there have been over 60 military aircraft accidents and over 100 total air accidents in Nigeria since 1925 when the first aircraft flew across Nigerian skies. Even at that, a lot of people have a misconception that only pilots, and aircraft owners need aviation insurance but that is not totally the case.
Insurance experts, while listing those that need aviation insurance included aircraft owners, operators of charter service or airline, pilots of commercial or recreational airlines, baggage or ground handling services, refuel aircraft, operators of commercial drones and owners of aircraft garages and airports.
According to the experts, this is because aviation insurance does not just cover the physical aircraft but insures passengers, cargo and third parties. As a result of these demands, the National Assembly joint committees on aviation recently emphasised the need for adequate funding of the sector to enable it to cope with the increase in demands for air travel.
The two chairmen of committees in the Senate and House of Representatives, Senator Abiodun Olujimi and Nnolim Nnaji, made the observation during an oversight working visit to the Accident Investigation Buteau (AIB) and the Nigerian Airspace Management (NAMA) to put enormous pressure on the existing aviation infrastructures which required that more investments should be made in the sector.
The Managing Director of NAMA, Mathew Pwajok had in his welcome remarks appreciated the committees of both Chambers of the National Assembly for their interest and concerns on matters affecting the aviation industry. He acknowledged their swift passage of the six Executive Bills on the industry as a true reflection of their commitment to the progress of the air transport sector in the country.
At the AIB, the members of the joint committees were impressed with the progress so far made in the upgrade of facilities and manpower at the Bureau which had led to the reduction of accidents in the country to the barest minimum.
Nnaji stressed that members were impressed that for the past seven years now, the country had not recorded any fatalities apart from the helicopter accident which occurred at Opebi in Lagos in early 2021.
The Commissioner of AIB, Akin Olateru, an aircraft engineer had told the legislators during his welcome remarks that the drastic reduction in aircraft accidents in the country had brought down the insurance premiums paid on operating airplanes in Nigeria
According to Olateru, the high safety records so far achieved by the country in the last couple of years had brought the insurance premiums on wide-body aircraft from $800,000 a year to between $150,000 and $200,000.
He also informed the two committees of the National Assembly that the Bureau has set the pace in air safety in Africa by establishing the first training institution for accident investigators on the continent.
Meanwhile, the current enactment regulating insurance business in Nigeria is the Insurance Act, 2003. The Act applies to all insurance businesses and insurers. The Aviation Insurance business is classified as general insurance.
In Nigeria, the Nigerian Civil Aviation Authority is saddled with the responsibility to ensure that all persons engaged in aviation operations comply with the minimum aviation requirements for air carriers to ensure compliance with their potential compensation obligations.
Pursuant to the Civil Aviation Act, any carrier or aerodrome operator, aviation fuel supplier, or any provider of ground handling services, meteorological services, air traffic control services, aircraft maintenance services, or provider of such other class of allied service as the Authority may from time to time determine in writing operating air transport services to, from or within Nigeria, shall maintain adequate insurance covering and also its liability towards compensation for damages may be sustained by third parties for an amount to be specified and in absence of such insurance shall be sufficient reason for refusal, suspension or revocation of the permission to operate the air transport service or services in Nigeria.
Also, the Nigerian Civil Aviation Authority requires aviation operators to submit copies of valid insurance certificates quarterly evidencing payment of premium and policy documents.
Regulation 18.11.17 of the Nigerian CAR- Air Transport Economic Regulations, 2015 prescribes the minimum third-party liability insurance limit for aircraft engaged in aircraft operations in Nigeria to be the maximum take-off weight (MTOW) of an aircraft. The regulations also prescribe the minimum insurance cover for carriage of passengers, mail, and cargo to be aircraft available seat capacity.
Approximately a hundred years ago, Lloyds London were the first to make it possible to offer insurance in Aviation prior to the World War in 1914.
