Chinedu Eze
It has emerged that regardless of the signing of Irrevocable De-Registration and Export Request Authorisation (IDERA) by the federal authorities, Nigerian airways are pressured to pay outrageous plane insurance coverage premium.
As an example, the plane insurance coverage premium paid final 12 months by Nigerian airways reached over N15 billion.
Final 12 months, there was an improved score of Nigeria by lessors, based mostly on enhanced compliance with Cape City Conference, which moved from 49 per cent in 2023 to 75.5 per cent in 2024, but Nigerian airways paid a lot for plane insurance coverage premium final 12 months.
The price of plane insurance coverage paid by Nigerian airways is relatively very excessive. In keeping with insurance coverage underwriters who concentrate on aviation insurance coverage, Nigerian airways pay minimal of $1 million every year for the insurance coverage of a single Boeing B737-300 basic, which is much greater than $100, 000 which airways in Europe and the US pay for the insurance coverage of the identical plane sort.
Insurance coverage stakeholders stated the excessive value stemmed from threat notion of operations in Nigeria, which they dubbed excessive nation threat, however the federal authorities has made efforts to deliver down the notion, which prompted Aer Cap to supply dry lease to main Nigerian airline, Air Peace, final 12 months after 10 years hiatus, when lessors blacklisted home carriers and solely provided moist lease of plane at exorbitant value.
Former President of Chartered Insurance coverage Institute of Nigeria (CIIN) and the Managing Director, Alpha Selection Insurance coverage Brokers, Sunny Adeda, stated regardless of the signing of the settlement or deed, there was no assure that aviation insurance coverage premium fee would come down this 12 months or within the nearest future.
In keeping with Adeda, there is no such thing as a common fee for aviation insurance coverage, noting that the premium relies upon available on the market threat at each time limit. “If the 12 months experiences smooth market (no accidents or disaster) then premium might be low but when there are accidents, terror assaults on the airport and different acts that threaten safety and security of flight operations, for instance, the plane insurance coverage premium might be excessive,” Adeda stated.
He, nevertheless, stated premium paid on helicopters was a lot greater than premium paid on mounted wing plane as a result of helicopters don’t fly excessive and so they document extra accidents that mounted wing plane and subsequently entice greater insurance coverage premium.
“Helicopter premium is excessive however, general, premium is decided in overseas market and if the magnitude of losses is excessive then premium payable that 12 months might be excessive,” Adeda famous.
The Government Secretary of Aviation Spherical Desk (ART), Olu Fidel Ohunayo, instructed THISDAY that there have been three components that have an effect on plane insurance coverage premium. “One was the safety of kit itself being returned with none authorized inhibitions and different clogs put in the way in which, which IDERA has solved. There have been additionally the fluctuating trade charges that weren’t good for the naira in comparison with the greenback, which was the product of measurement and the third issue was the nation safety score, which presently is barely that of the tools (plane) that the IDERA has addressed.
“The opposite two are nonetheless hanging. After which, sure, there may be hope if we proceed to enhance governance, enhance administrative buildings, enable the totally different arms of presidency to play their position as an establishment and never as an appendage of the chief.
“That offers sufficient confidence within the system and helps the score and in addition helps in bringing down the price of insurance coverage. As a result of it’s all these three components that have an effect on that value of insurance coverage. Now the IDERA has come, sure, we couldn’t get outcomes as a result of it occurred in 2024 and the message is simply sinking in and it’s nonetheless sinking in,” he stated.
He additionally famous that the truth that the manufacturing of plane shouldn’t be assembly the demand additionally has impression on insurance coverage premium, “as a result of main airline gamers who demand for brand new plane and aren’t getting it will naturally transfer into the lease market and as soon as the dominant gamers transfer into the lease market, they get to the highest of the ladder forward of non-major gamers.
“Leasing the plane to fulfill their demand will nonetheless maintain the shortage of the tools and due to that shortage, the insurance coverage may not be too beneficial in the intervening time.”
“I believe as issues start to enhance, as a result of as you understand, aviation is common. It’s not a Nigeria factor; you simply have to have a look at what is occurring across the market worldwide and see how one can profit from it. However for now, sure, the insurance coverage will go down however the different exterior components past the IDERA are a number of the issues that won’t make us see the impact as efficient as we would like it. However as soon as we are able to resolve all the opposite issues I’ve talked about, all different issues will be resolved, not by Nigeria alone, and even by the aviation group. Then you may make sure that the worth will come down and be very beneficial to all operators and Nigerian operators specifically,” he added.
Trade guide and former Rector, Nigerian School of Aviation Expertise (NCAT), Zaria, Captain Sam Caulcrick, instructed THISDAY that IDEDRA and Observe Course mainly enhance the probabilities of securing dry leases, however don’t instantly cut back insurance coverage underwriting prices.
“The difficulty is how the worldwide underwriters view the capability of the Nigerian Civil Aviation Authority (NCAA). The NCAA surveillance capability minimises underwriting cases and reduces excessive insurance coverage prices for Nigerian plane by guaranteeing strict adherence to worldwide security and operational requirements.
“Worldwide underwriters view strong security oversight as a direct indicator of minimised threat, which lowers premiums. The NCAA’s efficient surveillance capability works in a number of key methods: Guaranteeing Compliance with Worldwide Requirements: The NCAA enforces all Nigerian Civil Aviation Rules (Nig. CARs), that are aligned with the Worldwide Civil Aviation Organisation (ICAO) requirements and really helpful practices. Nigeria having a US Federal Aviation Administration (FAA) Class 1 score is a major think about assuring worldwide underwriters of a secure working atmosphere,” he stated.
On security oversight capabilities, he stated the NCAA’s Aviation Security Inspectors (ASIs) conducts rigorous scheduled and unscheduled on-the-spot inspections of airways and repair suppliers to make sure steady compliance with security rules.
The proactive surveillance, he stated, helps stop incidents and accidents, instantly decreasing the frequency and price of claims.
On obligatory coaching and upkeep, he stated the authority should make sure that all airline personnel are adequately educated and that plane upkeep is carried out as required and on time.
He stated adherence to stringent upkeep requirements, typically at overseas Upkeep, Restore, and Overhaul (MRO) centres, remauned a key threat issue assessed by worldwide insurers.
He stated NCAA has moved to implement stricter monetary compliance, introducing a “Zero Debt Technique” with obligatory Advance Fee Ensures (APG) for airways from January 2026; thus, demonstrating monetary stability and the power to fulfill obligations, together with insurance coverage premium funds, construct confidence with worldwide lessors and insurers.
On information and reporting transparency, Caulcrick stated: “Compliance with rules requiring well timed and correct reporting, such because the 72-hour occurrence-based reporting rule, ensures transparency in threat evaluation.”
On efficient implementation of the Cape City Conference, he additionally famous that the profitable implementation of the Irrevocable De-Registration and Export Request Authorisation procedures supplied authorized safeguards for worldwide lessors and financiers, “making them extra assured in leasing plane to Nigerian operators. This diminished “nation threat” related to asset restoration, which instantly interprets to decrease lease and insurance coverage prices.”
“By demonstrating a strong security tradition and regulatory atmosphere via efficient surveillance and enforcement, the NCAA instantly addresses the first considerations of worldwide underwriters, thereby minimising their perceived threat and decreasing the related excessive premiums,” he added.
