High insurance premium weighs down domestic airlines’ operations

Domestic airlines are currently battling for their operations under the weight of heavy premiums being charged by insurance companies in the country.

The airlines are alleging that the insurance companies, under the regulation of the National Insurance Commission (NAICOM), have over the last years been charging domestic carriers above five times the globally offered premium rate as insurance brokers, only to re-insure with the major underwriters abroad.

Insurance companies in the country do not have the capacity to underwrite any risk undertaken in the aviation industry on aircraft and so they act as middle men and re-insure with major underwriters like Lloyds of London, Allianz Aviation Insurance and Aerospace Insurance and a host of others who have the capacity to handle this.

It was gathered that an aircraft valued for about $10 million can be insured (for that valued with crew and third party liability suitable for Europe) in the United States of America, Britain or even the Barbados for between $80,000 and $100,000 as annual premium.

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A source who pleaded anonymity stated: “As a category civil aviation, Nigeria is supposed to be one of the low risk countries. And this should reduce premium further even and not hike it over and above global standard as has been the case in Nigeria for these long unfortunate years.

“However, insurance companies in the country, because of certain policies enacted are capitalising on the need for them to broker for the airlines to charge them between $300,000 and $600,000 for just about $10 million value aircraft or as the case may be only to turn around and then pay the underwriters what is globally known.

“These people are not underwriters, they cannot underwrite an accident in this industry, they don’t have the capacity as they are just brokers. All they do is collect so much money over five to ten times of the internationally known cost and re-insure with Lloyds and others.”

“These middle men are making business tough.

The source added: “What kind of risks are you talking about? Nigeria is Category One therefore a low risk country and one of the advantages of being Category One is the reduced insurance premium and since we are low risk to the international community why would our own country fleece us?”

“If our premium go down in Nigeria even foreigners will come and insure here so there should be no border limit to insurance as there are none elsewhere in aviation. Since it is an international business, it is callous for them to impose that Nigeria operators seek insurance only in Nigeria; they should leave the airlines alone to their choice as the counterparts’ world over.”

Speaking on the matter, Rasak Salami, spokesman for NAICOM, said they have investigated the matter but there is no fact to substantiate it.

“We have asked the airlines to provide evidence to this effect but they have not,” he said.

Sade Williams