The world’s leading insurance company for airlines, Lloyds of London, has threatened to blacklist domestic operators in Nigeria over a backlog of unpaid insurance premium, at least in the last four months.
The insurance company, which sent a delegation to Nigeria last week, expressed dissatisfaction with failure of most operators of commercial and charter services to fulfill their obligations of paying premiums to the insurer regularly, despite the “high-risk” environment they operate.
And should Lloyds carry out its threat, all domestic airlines in the country will be grounded as it is a no-no in global aviation practices for an aircraft to fly without insurance cover.
The airline operators have, however, blamed the current foreign exchange (forex) hike and non-availability of dollar as the reasons they have been unable to pay premium, which is the specified amount of payment required periodically by the insurer to provide coverage under a given insurance plan for a defined period of time.
It was yesterday learnt that the insurer, during the visit, had declared that the Nigerian market is “a high-risk market, yet the volume of business from the country is quite modestly small.”
Sources said that the guests cautioned that in view of the development, “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.”
The 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.
The Nigerian market is grossly unable to effectively underwrite risks in aviation because of the high exposure of an average $500million for just one airplane to cover hull, war and third party liability.
Chairman of the Airline Operators of Nigeria (AON), Capt. Nogie Meggison, confirmed the threat yesterday and said “the consequences will be dire for Nigeria’s economy”.
Meggison said that the airlines did not plan to default in paying the premium, but they could not change their naira to its dollar equivalent to offset the debt.
According to him, “Virtually 100 per cent of the aircraft being operated in Nigeria are re-insured in the Lloyd’s market, hence, Nigeria can’t afford to be blacklisted because this will have very grave and deleterious consequences, as the entire domestic airlines will shut down since airplanes can’t be operated without being insured.”
He added that switching to a secondary market of Russia and China would still not help Nigeria, since it would take days, coupled with the fact that premiums in the alternative markets will also have skyrocketed, if Nigeria is blacklisted by Lloyds.
“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 AON Chairman cautioned that if Nigeria is blacklisted from Lloyd’s market operators might still have a difficult time getting their aircraft insured because the alternative is the Chinese or Russian markets, which might find it hard to absorb them due to Lloyds action.
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