Airplane insurance premiums drop due to safety concerns

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Premiums paid on aircraft, especially of the broad type, are decreasing due to the new perception of safety records in Nigeria. The state’s safety records so far in the past two years have raised insurance premiums on wide-body aircraft from $800,000 a year to between $150,000 and $200,000.

Aviation insurance caters specifically to the operation of aircraft, as well as all the risks involved. Before now, insurance premiums in Nigeria on aircraft are considered the highest in West Africa. Over the years, Nigerian airlines have seen their insurance costs rise higher than what their counterparts in Ghana, South Africa and other African countries pay to insure their planes.

THEWILL combined that the perception of Nigeria as a high-risk environment and the high premiums demanded by local insurers have always made local operators pay higher while insuring their aircraft. Nigerian airlines pay between 8% and 10% of the value of the 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 per cent and one per cent to insure the same aircraft.

For example, airlines operating in Nigeria pay an average of $1 million annually to insure a B737-300 while airlines in Ghana or the United States pay between $200,000 and $300,000 to insure the same type of aircraft. Added to this is the fact that every plane parked on the ramp of any airport is guarded by security men at the expense of airlines and this is added to the operating cost and the cost of leasing, especially aircraft leased for service.

Therefore, insurance is very important in the field of aviation as it is seen as 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, indigenous airlines face enormous challenges in the forms of high insurance premiums, multiple taxes, forex issues, high cost of Jet A1 and unfavorable policies, among others. However, aviation insurance is now one of the largest sub-segments of the global insurance market.

Operationally, insurance is vital because accidents and even accidents sometimes happen. For example, there have been more than 60 military aircraft accidents and more than 100 total air accidents in Nigeria since 1925 when the first aircraft flew through Nigeria’s skies. Even at that time, many people had the misconception that only pilots and aircraft owners needed aviation insurance but this is not entirely the case.

Insurance experts, while the inclusion of those who require aviation insurance includes aircraft owners, charter or airline operators, commercial or recreational airline pilots, baggage or ground handling services, refueling aircraft, commercial drone operators, and owners of aircraft and airport garages. .

According to experts, this is because aviation insurance covers not only physical aircraft, but also passengers, cargo and third parties. As a result of these demands, the Joint Aviation Committees of the National Assembly recently emphasized the need for adequate funding for the sector to enable it to cope with the increase in demand for air travel.

The two chairmen of the Senate and House of Representatives Committees, Senators Abiodun Ologemi and Noulim Nnaji, made the remark during an oversight working visit to the Bhutto Accident Investigation Bureau (AIB) and the Nigerian Airspace Administration (NAMA) to put enormous pressure on existing aviation infrastructures that require further investment. in this sector.

NAMA Managing Director Matthew Boajock, in his welcome address, expressed his appreciation to committees in both Houses of the National Assembly for their concern and concerns on issues affecting the aviation industry. He recognized their swift passage of the six executive bills on the industry as a true reflection of their commitment to advance the country’s air transport sector.

At AIB, the members of the joint committees were impressed by the progress made so far in developing the facilities and manpower of the office which has reduced accidents in the country to a minimum.

Njie stressed that the members were impressed that for the past seven years now, the country has not recorded any fatalities except for the helicopter accident that took place at Ubebe in Lagos in early 2021.

AIB Commissioner, Akin Olateru, an aircraft engineer, told lawmakers during his welcoming remarks that the significant reduction in aircraft accidents in the country had led to lower insurance premiums paid on aircraft operating in Nigeria.

According to Olateru, the state’s high safety records so far in the past two years have raised insurance premiums on wide-body aircraft from $800,000 a year to between $150,000 and $200,000.

He also informed the two National Assembly committees that the office set the pace in the field of aviation safety in Africa by establishing the first training institution for accident investigators on the continent.

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

In Nigeria, the Nigerian Civil Aviation Authority has a responsibility to ensure that all persons involved in flight operations comply with the minimum flight requirements of air carriers to ensure compliance with potential compensation obligations.

In accordance with the Civil Aviation Law, any carrier or airport operator, aircraft fuel provider, any provider of ground handling services, meteorological services, air traffic control services, aircraft maintenance services, or a service provider of this type of allied services as Authority may. From time to time specify in writing that air transport services operating to, from or within Nigeria shall maintain adequate insurance coverage and also their liability for damages which may be incurred by third parties in an amount to be determined and in the absence of such insurance shall be sufficient cause for refusal or suspension or revoke permission to operate an air transport service or services in Nigeria.

Also, the Nigerian Civil Aviation Authority requires aviation operators to submit copies of valid insurance certificates every three months proving payment of premiums and policy documents.

Regulation 18.11.17 of the CAR- Air Transport Nigeria Economic Regulations 2015 sets the minimum third party liability insurance for aircraft engaged in aircraft operations in Nigeria to be the maximum take-off weight (MTOW) of the aircraft. The regulations also specify minimum insurance coverage for passenger, mail and cargo to be the available seating capacity of the aircraft.

Nearly a hundred years ago, Lloyds London was the first to offer aviation insurance before the World War in 1914.

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