Despite Improved Rating with Lessors, Nigerian Airlines Still Pay Outrageous Aircraft Insurance Premium
Chinedu Eze
It has emerged that despite the signing of Irrevocable De-Registration and Export Request Authorisation (IDERA) by the federal government, Nigerian airlines are forced to pay outrageous aircraft insurance premium.
For instance, the aircraft insurance premium paid last year by Nigerian airlines reached over N15 billion.
Last year, there was an improved rating of Nigeria by lessors, based on enhanced compliance with Cape Town Convention, which moved from 49 per cent in 2023 to 75.5 per cent in 2024, yet Nigerian airlines paid so much for aircraft insurance premium last year.
The cost of aircraft insurance paid by Nigerian airlines is comparatively very high. According to insurance underwriters who specialise in aviation insurance, Nigerian airlines pay minimum of $1 million per annum for the insurance of a single Boeing B737-300 classic, which is far higher than $100, 000 which airlines in Europe and the United States pay for the insurance of the same aircraft type.
Insurance stakeholders said the high cost stemmed from risk perception of operations in Nigeria, which they dubbed high country risk, but the federal government has made efforts to bring down the perception, which prompted Aer Cap to offer dry lease to leading Nigerian airline, Air Peace, last year after 10 years hiatus, when lessors blacklisted domestic carriers and only offered wet lease of aircraft at exorbitant cost.
Former President of Chartered Insurance Institute of Nigeria (CIIN) and the Managing Director, Alpha Choice Insurance Brokers, Sunny Adeda, said despite the signing of the agreement or deed, there was no guarantee that aviation insurance premium rate would come down this year or in the nearest future.
According to Adeda, there is no regular rate for aviation insurance, noting that the premium depends on the market risk at every point in time. “If the year experiences soft market (no accidents or catastrophe) then premium will be low but if there are accidents, terror attacks at the airport and other acts that threaten security and safety of flight operations, for example, the aircraft insurance premium will be high,” Adeda said.
He, however, said premium paid on helicopters was much higher than premium paid on fixed wing aircraft because helicopters don’t fly high and they record more accidents that fixed wing aircraft and therefore attract higher insurance premium.
“Helicopter premium is high but, overall, premium is determined in foreign market and if the magnitude of losses is high then premium payable that year will be high,” Adeda noted.
The Executive Secretary of Aviation Round Table (ART), Olu Fidel Ohunayo, told THISDAY that there were three factors that affect aircraft insurance premium. “One was the security of equipment itself being returned without any legal inhibitions and other clogs put in the way, which IDERA has solved. There were also the fluctuating exchange rates that were not good for the naira compared to the dollar, which was the product of measurement and the third factor was the country security rating, which currently is only that of the equipment (aircraft) that the IDERA has addressed.
“The other two are still hanging. And then, yes, there is hope if we continue to improve governance, improve administrative structures, allow the different arms of government to play their role as an institution and not as an appendage of the executive.
“That gives enough confidence in the system and helps the rating and also helps in bringing down the cost of insurance. Because it is all those three factors that affect that cost of insurance. Now the IDERA has come, yes, we could not get results because it happened in 2024 and the message is just sinking in and it is still sinking in,” he said.
He also noted that the fact that the manufacturing of aircraft is not meeting the demand also has impact on insurance premium, “because major airline players who demand for new aircraft and are not getting it would naturally move into the lease market and once the dominant players move into the lease market, they get to the top of the ladder ahead of non-major players.
“Leasing the aircraft to meet their demand will still sustain the scarcity of the equipment and because of that scarcity, the insurance might not be too favourable at the moment.”
“I think as things begin to improve, because as you know, aviation is universal. It is not a Nigeria thing; you just have to look at what is happening around the market worldwide and see how you can benefit from it. But for now, yes, the insurance will go down but the other external factors beyond the IDERA are some of the things that will not make us see the effect as effective as we want it. But once we can solve all the other things I have mentioned, all other things can be resolved, not by Nigeria alone, and even by the aviation community. Then you can be sure that the price will come down and be very favourable to all operators and Nigerian operators in particular,” he added.
Industry consultant and former Rector, Nigerian College of Aviation Technology (NCAT), Zaria, Captain Sam Caulcrick, told THISDAY that IDEDRA and Practice Direction basically improve the possibilities of securing dry leases, but do not directly reduce insurance underwriting costs.
“The issue is how the international underwriters view the capacity of the Nigerian Civil Aviation Authority (NCAA). The NCAA surveillance capacity minimises underwriting instances and reduces high insurance costs for Nigerian aircraft by ensuring strict adherence to international safety and operational standards.
“International underwriters view robust safety oversight as a direct indicator of minimised risk, which lowers premiums. The NCAA’s effective surveillance capacity works in several key ways: Ensuring Compliance with International Standards: The NCAA enforces all Nigerian Civil Aviation Regulations (Nig. CARs), which are aligned with the International Civil Aviation Organisation (ICAO) standards and recommended practices. Nigeria having a US Federal Aviation Administration (FAA) Category 1 rating is a significant factor in assuring international underwriters of a safe operating environment,” he said.
On safety oversight functions, he said the NCAA’s Aviation Safety Inspectors (ASIs) conducts rigorous scheduled and unscheduled on-the-spot inspections of airlines and service providers to ensure continuous compliance with safety regulations.
The proactive surveillance, he said, helps prevent incidents and accidents, directly reducing the frequency and cost of claims.
On mandatory training and maintenance, he said the authority must ensure that all airline personnel are adequately trained and that aircraft maintenance is carried out as required and on time.
He said adherence to stringent maintenance standards, often at foreign Maintenance, Repair, and Overhaul (MRO) centres, remauned a key risk factor assessed by international insurers.
He said NCAA has moved to enforce stricter financial compliance, introducing a “Zero Debt Strategy” with mandatory Advance Payment Guarantees (APG) for airlines from January 2026; thus, demonstrating financial stability and the ability to meet obligations, including insurance premium payments, build confidence with international lessors and insurers.
On data and reporting transparency, Caulcrick said: “Compliance with regulations requiring timely and accurate reporting, such as the 72-hour occurrence-based reporting rule, ensures transparency in risk assessment.”
On effective implementation of the Cape Town Convention, he also noted that the successful implementation of the Irrevocable De-Registration and Export Request Authorisation procedures provided legal safeguards for international lessors and financiers, “making them more confident in leasing aircraft to Nigerian operators. This reduced “country risk” associated with asset recovery, which directly translates to lower lease and insurance costs.”
“By demonstrating a robust safety culture and regulatory environment through effective surveillance and enforcement, the NCAA directly addresses the primary concerns of international underwriters, thereby minimising their perceived risk and reducing the associated high premiums,” he added.
