Insurance

Insurance: Disquiet over Lloyds’ threat to withdraw services for airlines

Hadi Sirika, Minister of State for Aviation

By Abdullateef Aliyu

There is unease among domestic airlines in Nigeria following threat by Lloyd’s of London, the world’s leading insurance market, to blacklist them over irregular payment of premiums.

It was learnt that representatives of Lloyd’s of London market were in Nigeria recently when they declared Nigerian market a high risk.

They noted that the volume of business from the country was “quite modestly small and airline brokers are not paying their premium.”

Therefore, the global insurance company is threatening to blacklist the airlines over defaults in the payment of insurance.

Daily Trust learnt that virtually all the aircraft operated in Nigeria were re-insured in the Lloyd’s market.

Should the company go ahead with its threat to blacklist Nigerian airline operators, the entire domestic airlines would shut down because no plane can fly without the necessary insurance. Besides, it would have serious consequences on the economy of Nigeria.

Daily Trust recalled that Arik Air, the largest domestic carrier, had on September 13 temporarily shut down operations when its insurers withdrew services over inability to meet some financial obligations.

This is why the domestic carriers are afraid that such fate might befall them unless government urgently comes to their rescue by conceding some dollars to them to regularise their insurance premiums.

An airline operator said, “What is happening is not different from the foreign exchange constraint we have been experiencing all this while. We also pay our premium in dollars which we are not being able to meet considering the non-availability of forex.

“So now that Lloyds is threatening to downgrade and blacklist us, it means more woes for the operators. The whole domestic network may just collapse and we all know the implication of that.”

The chairman, Airline Operators of Nigeria (AON), Capt. Nogie Meggison, disclosed that airlines have naira which they are unable to convert to dollars to pay premiums.

According to him, Lloyd’s market accounts for about 92% of reinsurance of airlines globally; 5% by Russian market, Cyprus and others, while a mere 2% is retained locally worldwide.

In a statement on Monday, he said “The Nigerian market is grossly unable to effectively underwrite risks in aviation because of the high exposure of an average $500 million for just one airplane to cover hull, war and third party liability.

“When this figure is multiplied by the number of aircraft operating in the country it becomes clear that Nigerian insurance companies can’t cope considering the enormous volume of resources needed to cover all those aircraft of which the total coverage value will be in excess of $6 billion.”

On the implication of blacklisting of Nigeria by the insurance company, he said, “A blacklist will certainly have a negative impact on the Nigerian economy arising from inability to acquire aircraft from lessors with no insurance; total suspension of operations by airline charter and oil support helicopters, job losses, and other sectors being reinsured by Lloyds market such as oil rigs, vessels, high rise buildings, airports and terminal buildings etc.

“Similarly, a downgrade or outright blacklist will mean very high premiums due to high risk levels.”

The operators however called on the Minister of State Aviation, Senator Hadi Sirika, to urgently bail out domestic carriers by forging a joint working group with the Federal Ministry of Finance and the Central Bank of Nigeria to address the current challenge.

Daily Trust

Leave a Comment

Your email address will not be published. Required fields are marked *

*