Nigerian airlines, so as to meet the regulation of the National Insurance Commission (NAICOM), ensure local insurance of their aircraft and international insurance of the same aircraft with international insurance companies like Lloyd. This double insurance practice is done by Nigerian airlines to meet the standard of aircraft manufacturers and lessors. Experts in the aircraft industry have projected that the double premium practiced by Nigerian airlines costs an estimation of more than N300 billion yearly.
It has been said that there is a harsh environment for operation of aircrafts within Nigeria. As a result, while several countries pay one percent value of an aircraft in insurance, Nigeria is mandated to pay eight times of the value of the same aircraft. So, Nigerian airlines pay expensive insurance premiums compared to other countries across the globe due to its designation as high risk country. International aircraft insurance companies are responsible for defending the high premium paid by Nigerian airlines, oblivious of the high premium paid to meet local NAICOM.
Country does not have internal capacity for massive insurance.
The Chief Operating Officer of United Nigeria airlines, Osita Okonkwo, stated that some lessors have refused to lease aircraft to Nigerian airlines due to the country’s insurance policies. Lessors who lease their aircraft enforce wet lease which includes them in management of the aircraft, maintenance, crew and insurance, contrary to dry lease which leaves management, maintenance and crew to the airline. He added that the inability of Nigeria to insure its aircrafts is at the cost of the individual airlines.
Thus, Nigerian carriers employ group insurance which is unacceptable by aircraft manufacturers and lessors. According to Okonkwo, on many occasions, lessors are attracted to the books and performances of Nigerian airlines but are unable to lease the aircraft due to the country’s risk rating; with this, he urged the government to find a means of resolving the issue. He further said that Nigeria lacks internal capacity for massive insurance like aircraft insurance.
Lessors prefer their aircrafts insured in London, Dubai or New York.
Given the law that says insurance must be originated in Nigeria, several massive aircrafts are likely to go for a $600 million minimum combined single unit. However, lessors, when leasing their aircrafts, either through dry or wet lease, always like their aircraft insurance done in London by Lloyds or in New York or in Dubai. They likewise ensure reinsurance specificity, ruling out group insurance. As a result, Nigerian airlines fulfill the Nigerian law of local insurance and the lessors’ requirement of international insurance.
Additionally, it was deduced that many lessors refuse to operate in Nigeria because of the country’s insurance state. This deduction has made the COO of the United Nigeria Airlines to emphasize the need for NAICOM education concerning the situation. He included the fact that even indigenization cannot be achieved with another’s man’s asset, so Nigerian airlines do local insurance to obey the law while they go the extra mile to satisfy the manufacturer or lessor – a practice regarded as double cost.
Local insurance would help development of local market.
According to reports, in 2017 Nigerian airlines paid an annual average of $1 million for insurance of a B737-300 aircraft compared to Ghanaian and US airlines which pay between $200,000 and $300,000 respectively for insurance of the same aircraft. However, in defense of the Nigerian policy, the Managing Director of Universal Insurance Plc, Ben Ujoatuonu, asserted that the insurance of airlines must be done in Nigeria according to the local content rule as it would help develop local market and enable reduction of foreign exchange flight to international market.
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Nigerian Airlines practice double insurance. – Industry experts say Nigerian airlines spend N300b annually on double insurance. – Express your point of view.
So far the double insurance is aimed at ensuring they can maximize their output in their aircraft service, then it’s fine. Insurance is actually very important for every business to thrive.
To comply with the National Insurance Commission’s requirements, Nigerian airlines ensure their planes both domestically and abroad, with domestic insurance providers like Niger Insurance and foreign providers like Lloyd’s of London.
The practice of charging a double premium, which is common among Nigerian airlines, is estimated to result in significant annual costs for the country’s aviation industry.
Nigerian airlines engage in this practice of double insurance so that they can live up to the expectations of aircraft makers and lessors.
Due to the fact that Nigeria is considered a high risk country, the insurance rates that Nigerian airlines must pay are significantly higher than those paid in other nations across the world.
It has been asserted that the atmosphere in Nigeria is not conducive to the safe operation of airplanes in any capacity.
According to experts in the aircraft business, Nigerian airlines’ double premium practice costs an estimated N300 billion annually.
The individual airlines are responsible for covering the costs associated with Nigeria’s failure to insure its aircrafts.
Rental companies who lease their aircraft typically require tenants to sign wet leases, which involve the lessors in the administration and maintenance of the leased aircraft.
Nigeria is required to pay eight times the value of the same aircraft in insurance, when other nations just pay one percent of the value of an aircraft.
The government should find a means of resolving the issue, as it would help develop local market and enable reduction of foreign exchange flight to international market.
Although we can say their action doubling insurance is understandable but the additional cost incurred should also be considered.
If the local insurance company are able to insure all the airlines in the country,it will really generate income to the government and people will employment through this
It is estimated that the double premium charged by several Nigerian airlines costs the country’s aviation industry a lot of money every year.
Insurance is good for business but our country is paying double insurance due to high risk, we are paying high than other country
To meet the requirements of aircraft manufacturers and lessors, airlines in Nigeria often carry two sets of insurance.
Insurance premiums for Nigerian airlines are far higher than those in any other country since the country is viewed as particularly dangerous.
As indigenization cannot be performed with someone else’s asset, Nigerian airlines must pay twice for the privilege of complying with the law and satisfying the asset’s original owner, the maker or lessor.
Industry experts say Nigerian airlines spend N300b annually on double insurance. If the double charge is okay by them, it fine
It is quite of unfortunate that double insurance practice in the Nigerian Airline. In Nigeria we over do things all just to make too much profit.
The Nigerian Airline has been placed under pressure by National Insurance Commission (NAICOM) through double insurances which is not obtainable in other countries.