Nigerian airlines have increasingly continued to pay higher insurance premium for aircraft insurance, THISDAY has learnt.
This was attributed to what experts described as increasing country risk in Nigeria. This included insecurity, government’s inconsistent policies in the aviation industry, which insurers dubbed lack of rule of law and what was referred to as harsh operational environment.
The Managing Director of Aero Contractors, Captain Ado Sanusi told THISDAY that the premium for aircraft insurance in Nigeria has increased and with the latest security breach at the Murtala Muhammed International Airport (MMIA), Lagos premium for aircraft insurance would further increase.
Sanusi also noted that since the crash of Boeing 737 MAX in Indonesia and Ethiopia, in addition to the crash landing of Russian jet in May this year, there has been increase in insurance premium for aircraft globally, noting that the global increase would almost double insurance premium in developing countries.
He noted that in Nigeria the general insecurity in the country, added to the recent security breach at the Lagos airport would multiply aircraft insurance premium for Nigerian carriers.
“The recent security breach at the Lagos airport, which was broadcast all over the world, including on CNN will certainly increase the premium we pay for aircraft insurance. There is general increase in aircraft insurance premium since the tragic crash of Boeing 737 MAX and that accident in Russia. But if the global insurance premium is 10 per cent they will give us 15 per cent because of what they call our country risk, the insecurity in the country and the recent security breach at the Lagos airport.
“We operate in a harsh environment. It is difficult to lease aircraft and our insurance premium is very high. This will dwindle the profits of our airlines and put them in precarious situation. It is difficult to operate profitably in our environment,” Sanusi said.
Explaining why Nigerian airlines pay higher premium than their counterparts in other parts of the world, the immediate past Chairman, Nigeria Insurers Association (NIA) umbrella body of insurance underwriters, Mr. Eddie Efekoha, said there was no basis of comparison between Nigerian aviation insurance providers and their foreign counterparts because the level of risk exposures of both are different.
He said insurance premium rate was high in Nigeria because Nigeria has high country risk and the airports lack essential facilities, with porous security system and touts milling over the entire place.
“Look at our airports, with all the touts and other problems, so everything is wrong with our airports; so the insurance rates cannot but be high. When we get our things right, the premium can reduce. Of course, size is an issue.
“You are generating a premium for instance that cannot buy one plane but like the likes of BA, their premium can buy three Planes. So size is an issue,” he explained.
Efekoha who is also the Managing Director, Consolidated Hallmark Insurance Plc, explained the Nigeria has multiplicity of problems.
“We have multiplicity of problems when it comes to aviation insurance in Nigeria and you must take all of these into account in your rating. What is rating? First of all, it starts with underwriting; look at the good features and look at the bad features and all these help you to determine your average rate, the good ones will help you to determine your discount rate, the bad ones will help you to blow the rates in order to come with the rates that apply to that particular risk. When you bring all of these into specific operators, you then look at their managements,” he said.
A former Chief Security Officer of the Lagos airport told THISDAY that security breach at the airport has significant impact on the insurance of any aircraft registered in Nigeria.
“First they look at where the aircraft is based, where it operates and weigh the risks. If they feel that where the airline that operates the aircraft is not very safe and where the aircraft operates to, like the other airports in Nigeria are also not safe, they increase the insurance premium,” the former Chief Security Officer said.