The world’s leading insurance market, Lloyd’s of London, has threatened to blacklist Nigerian airline operators over their continued failure to fulfill their obligations of paying their premiums to the insurer regularly.
Representatives of Lloyd’s of London market who were in Nigeria recently, noted that the Nigerian market is a high risk market yet the volume of business from the country is quite modestly small and airline brokers are not paying their premium.
To this end, they cautioned that in view of the fact that airlines brokers in Nigeria have in recent times failed to pay their premiums 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.
Chairman, Airline Operators of Nigeria, AON, Captain Nogie Meggison disclosed that the Airlines say they have Naira; but they cannot pay the premiums due to forex constraints.
Captain Meggison noted that a blacklist would 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.
He revealed further that 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.
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. 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 $6bn.
“Virtually 100% of the aircraft being operated in Nigeria are re-insured in the Lloyd’s market. Hence, Nigeria can’t afford to be blacklisted as a nation 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 stressed. 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.
Meggison added that: “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.”
Furthermore, 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 the fact that Lloyds has blacklisted us.
He said, for instance, that if Nigeria is blacklisted the premiums will rise by 300% due to the high risk, adding that even the National Carrier of Russia, Aeroflot Airlines has 98% of its risks underwritten by Lloyds of London market while 2% is retained locally in Russia; so is Air China.
“We are not keeping to payment dates. Domestic carriers have a 4-months backlog on payment. It will be funny to wait until there is an incident before the airline tries to pay its premium,” Meggison warned.
We therefore use this medium to call on the Honourable Minister of State Aviation, Senator Hadi Sirika to as a matter of urgency come to the aid of domestic airlines operating in the country by forging a joint working group with the Federal Ministry of Finance and the Central Bank of Nigeria to brainstorm and cross-fertilize ideas on how the nation can take exigent steps forestall a potential backlash on the Nigerian economy and totally avoid the downgrade/blacklist in the interest of safety and economic prosperity of the country.