Plane insurance premiums plummet over safety concerns

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Insurance premiums paid on aircraft, especially wide-body aircraft, are falling due to a new perception of Nigeria’s safety record. The safety records achieved so far by the country in the past two years have pushed insurance premiums on large aircraft from $800,000 a year to between $150,000 and $200,000.

Aviation insurance specifically covers the operation of aircraft, as well as all risks incurred. Until now, Nigeria’s insurance premium on aircraft was recognized as the highest in West Africa. Over the years, Nigerian airlines have seen their insurance costs exceed what their peers in Ghana, South Africa and other African countries pay to insure their planes.

THEWILL understood that the perception of Nigeria as a high risk environment and the high insurance premiums demanded by local insurance companies had always caused local operators to pay more when insuring their aircraft. Nigerian airlines pay between 8% and 10% 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%.

Airlines operating in Europe and the United States pay between 0.5% and 1% to insure the same plane.

For example, airlines operating in Nigeria pay an average of $1 million per year to insure a B737-300 aircraft, while airlines in Ghana or the United States pay between $200,000 and $300,000 to insure the same. aircraft type. Added to this is the fact that every aircraft parked on the tarmac at any airport is guarded by security guards at the expense of the airlines, which adds to the cost of operation and the cost of rental, in particular of wet-leased aircraft.

Insurance is therefore very important in aviation because the latter is considered 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 example, the national airlines face huge challenges in the form of high insurance premiums, multiple taxes, currency issues, the high cost of the Jet A1, and disadvantageous policies, among others. Nevertheless, aviation insurance has become one of the largest subsectors in the global insurance market.

Operationally, insurance is vital because accidents and even incidents sometimes happen. 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 over the Nigerian skies. Even so, many people mistakenly think that only pilots and aircraft owners need aviation insurance, but that’s not quite the case.

Insurance adjusters, while listing those who need aviation insurance, included aircraft owners, charter service or airline operators, commercial or recreational airline pilots, baggage services or ground handling, tanker aircraft, commercial drone operators and owners of aircraft garages and airports.

According to experts, this is because aviation insurance does not only cover the physical aircraft but insures passengers, cargo and third parties. Following these requests, the joint committees of the National Assembly on aviation have recently stressed the need for adequate financing of the sector to enable it to cope with the increase in air transport demands.

The two chairmen of the Senate and House of Representatives Committees, Senator Abiodun Olujimi and Nnolim Nnaji, made the observation during a monitoring working visit to the Accident Investigation Buteau (AIB) and the Nigerian Airspace Management (NAMA) to put enormous pressure on the existing aviation infrastructure that needed more investment in the sector.

NAMA Director General, Mathew Pwajok, in his welcoming address, appreciated the committees of both Houses of the National Assembly for their interest and concern on issues affecting the aviation industry. He acknowledged their swift passage of the six executive industry bills as a true reflection of their commitment to the advancement of the airline sector in the country.

At the AIB, members of the Joint Commissions have been impressed with the progress made so far in modernizing the facilities and staffing of the Bureau, which has helped to minimize the number of accidents in the country.

Nnaji pointed out that members were impressed that for seven years now, the country had not recorded any fatalities apart from the helicopter crash that occurred at Opebi in Lagos in early 2021.

AIB Commissioner Akin Olateru, an aeronautical engineer had told lawmakers during his welcome address that the drastic reduction in plane accidents in the country had lowered insurance premiums paid on planes operating in the country. Nigeria.

According to Olateru, the high safety records achieved so far by the country in the past two years have pushed insurance premiums on large aircraft from $800,000 a year to between $150,000 and $200,000.

He also informed the two National Assembly Committees that the Office has set the tone for aviation safety in Africa by establishing the first accident investigator training institution on the continent.

Meanwhile, the current law regulating insurance business in Nigeria is the Insurance Act 2003. The law applies to all insurance companies and all insurers. The aviation insurance business is classified as general insurance.

In Nigeria, the Nigerian Civil Aviation Authority is responsible for ensuring that all persons engaged in aviation operations comply with the minimum aviation requirements for air carriers to ensure compliance with their potential aviation obligations. compensation.

In accordance with the Civil Aviation Act, any carrier or aerodrome operator, supplier of aviation fuel or any supplier of ground handling services, weather services, air traffic control services, aircraft maintenance or such other class of allied services as the Authority may from time to time determine in writing the operation of air transport services to, from or within Nigeria, shall maintain cover adequate insurance and its liability for compensation for damages may be borne by third parties for an amount to be specified and in the absence of such insurance shall be sufficient cause for refusal, suspension or revocation of the authorization to operate the air transport service(s) in Nigeria.

In addition, the Nigerian Civil Aviation Authority requires air operators to submit quarterly copies of valid insurance certificates showing payment of premiums and policy documents.

Section 18.11.17 of the Nigerian CAR Air Transport Economic Regulations 2015 prescribes that the minimum liability insurance limit for aircraft engaged in air operations in Nigeria is the maximum take-off weight (MTOW) of an aircraft . The regulations also prescribe that the minimum insurance coverage for the carriage of passengers, mail and cargo corresponds to the available seat capacity of the aircraft.

Around a hundred years ago, Lloyds London pioneered the provision of aviation insurance before World War I in 1914.

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