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Infrastructure decay that dotted many of Nigeria’s airports, categorization of airports in the country and particularly African nations as ‘unsafe’ and the perceived high rate of air accidents has 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 rate their charge airlines are not derived from Nigeria but from the same United Kingdom (UK) market, hinting 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, “However, 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, Bolf and Company Insurance Brokers Limited, Chief Babajide Olatunde-Agbeja who spoke to Aviation Metric on the sidelines of Cargo and Export symposium otherwise known at Chinet 2021 that brought together under one roof 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His words, “They categorized our airports as unsafe because of the outdated equipment we were using but things are getting better.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. “
“Any one 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 8 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 1 percent 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 the Nigerian airlines is different from what business aviation; charter operators and private jet owners pay as insurance premiums on their jets annually.
Eighty percent of insurance premiums are carried out abroad with international insurance companies such as Lloyds of London while the other 20 percent 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.
Also, investigation by our correspondent revealed that active scheduled aircraft among the indigenous carriers have dropped to just 40 from the initial 80 aircraft about two years ago, majorly due to the impact of COVID-19 pandemic, scarcity of Foreign Exchange to enable airlines bring back their airplanes that are idling away after maintenance overseas and other tough challenges faced by the carriers..
An average age of aircraft in the country’s sky is between 16 and 24 years old while a used 1999 Boeing 737-300 aircraft, which 90 percent of the nation’s airlines use for flight operations is valued at $5.5 million in the international market (about N2, 242,500,000 at the exchange rate of N500 to a dollar).
Olatunde-Agbeja stated that the Aviation industry is a highly capital intensive one supported by many governments worldwide, adding that there are a few private sector players but due to the need for deep pockets, stressing that governments are great spenders by their nature and set up.
He further admitted that government participation has been very high, but lamented that Nigeria, with a population of over 200 million people, should be the largest player in Africa.
“Unfortunately, she is not. The largest aviation operative in Africa is the Republic of South Africa with Nigeria coming up at a distant second place. With the high level/volume of finance necessary to run an aviation company, it stands to reason that the best friend of aviators should be the insurance industry,” he added.Google+