The year 2016 hasn’t been a good year for the airline industry in Nigeria. Most of them are highly in debt, they have also seen revenue dwindle due to the economic recession, faced labour related issues, can’t access forex to pay for capex and now can’t even pay premium on their insurance.
Non payment of insurance premium is another major risk as the consequences can be widespread. The Chairman of Airline Operators of Nigeria (AON) Nogie Meggison was quoted recently in the Nation and explained what the potential impact could be. Here is what he had to say when asked about the impact of not paying insurance premium.
“If Nigeria is blacklisted, the premium will rise by 300 per cent due to high risk.
“We are not keeping to payment dates. Domestic carriers have a four-month’ backlog on payment. It will be funny to wait until there is an incident before the airline tries to pay its premium.
“We, therefore, use this medium to call on the Minister of State Aviation, Hadi Sirika, to as a matter of urgency come to the aid of domestic airlines operating in the country.
“One of the ways to achieve this is to forge a joint working group with the Federal Ministry of Finance and the Central Bank of Nigeria (CBN) on how the nation can take exigent steps to avoid the downgrade/blacklist in the interest of safety and the economy.”
“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.
“Virtually 100 per cent of the aircraft being operated in Nigeria are re-insured by Lloyd’s, hence, Nigeria can’t afford to be blacklisted as a nation because this will have very grave consequences, as the entire domestic airlines will shut down since airplanes can’t be operated without being insured.
“It will take some days at best to switch to the secondary market of Russia and China, whose premiums will also have skyrocketed if we are blacklisted by Lloyd’s,” Chairman Airline Operators of Nigeria (AON) , Nogie Meggison, has said.
In addition to the above, the Nigerian insurance industry will also likely be significantly. Foreign Insurance companies typically require their local Nigerian counterparts to partner with them before insurance deals can be consummated. With the no premium no cover policy of NAICOM, local insurance counterparts will not book the revenue.