The lack of capacity by Nigerian insurance firms to provide cover for airlines, scarcity of foreign exchange and devaluation of the country’s currency, the naira, are threatening the operations of many carriers in the country.
Managing Director, Medview Airlines, Alhaji Muneer Bankole, stated this while speaking with Woleshadare.net in Monrovia when the airline began air services to Accra, Freetown and Monrovia.
The Nigerian market is grossly unable to effectively underwrite risks in aviation because of the high exposure of an average $500 million to cover hull, war and third party liability.
He stated that the attitude of operators who reneged on paying their premiums forced insurance firms to threaten to withdraw cover for defaulting airlines.
Bankole disclosed that the entire Nigerian insurance companies have only about 15 per cent capacity to carry, adding that the rest are willed out to European and other companies, especially Lyold’s of London, describing the actions of some operators as bad.
Lloyd’s unique insurance market has an unrivalled concentration of specialist underwriting expertise and every day, over 50 leading insurance companies, over 200 registered Lloyd’s brokers and a global network of over 4,000 local cover holders operate in and bring business to the Lloyd’s market, the world’s leading insurance platform.
The business written at Lloyd’s is brought to specialist syndicates who price and underwrite risk via brokers and cover holders.
Much of the capital available at Lloyd’s is provided on a subscription basis – where Lloyd’s underwriters join together as syndicates and where syndicates join together to underwrite risks and programmes.
This kind of collaboration, combined with the choice, flexibility and financial certainty of the market, makes Lloyd’s The airline chief said insurance firms are wary to assist many Nigerian based airlines because of their penchant for disappointing when least expected.
His words: “The issue of insurance is dollar-domiciled. Nigerian insurance companies have no capacity to carry the brunt.
The entire Nigerian insurance companies, including brokers, about 26 of them have only 15 per cent capacity to carry, the rest are willed out to European and other countries.
“So, what happens here is that whatever you pay on insurance is equally dollar, so what the insurance people are doing is a two way thing. Some of our colleagues have done something bad, they have disappointed in paying the premium as at when due.
So, the people are now saying, gentlemen, we are having crisis, don’t wait until something happens, you need to pay your premium, it is a commitment,” he added.
Just last month, Lloyd’s of London issued a warning to Nigerian airline operators that it might be forced to blacklist the country in the face of continued failure of some operators to fulfil their obligations of paying their premiums to the insurer regularly.
However, Chairman, Air line Operators of Nigeria (AON), Captain Nogie Meggison, disclosed that airlines with their naira cannot pay the premiums due to forex constraints.
Meggison said that Lloyd’s market accounts for about 92 per cent of reinsurance of airlines globally, five per cent by Russian market, Cyprus and others, while a mere two per cent is retained locally worldwide.
Representatives of Lloyd’s of London, who were in Nigeria recently, noted that the Nigerian market is a high risk market, yet the volume of business from the country is quite small, lamenting that airline brokers are not paying their premiums.
To this end, the firm cautioned that in view of the fact that airlines brokers in Nigeria have in recent times failed to pay their premiums the Lloyd’s market might have no other choice than to blacklist the country, which might have far-reaching consequences for the aviation industry and the country to a large extent.