Airlines face imminent shutdown over insurance premium defaults

By Odunewu Segun

The threat Lloyd’s of London to blacklist airline operators in Nigeria for failing to meet up with the payment of their insurance premiums may cripple the industry unless the federal government intervenes, National Daily has gathered.

Lloyd, the world’s leading insurance market had issued a warning to Nigerian airline operators that it may be forced to blacklist the country in the face of continued failure of some operators to pay their premiums regularly.

The company’s representatives, who were in Nigeria recently, noted that the Nigerian market was a high risk market with the volume of business modestly small and airline brokers not paying their premiums.

Lloyd warned that in view of the fact that airlines brokers in Nigeria had in recent times failed to pay their premiums, it may have no other choice than to blacklist the country.

Speaking on the implication for Nigeria’s aviation sector, Chairman of Airline Operators of Nigeria (AON), Nogie Meggisson, said the development may have far-reaching consequences for the aviation industry and the country. He said the airlines claimed they had naira but could not pay premiums because of foreign exchange constraints.

The AON chairman said a blacklist would lead to over 300 per cent rise in premiums because of the high risk and as such Nigeria should do anything possible to avert it.

“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.”

He said virtually 100 per cent of the aircraft being operated in Nigeria are re-insured in the Lloyd’s market because of the high exposure of an average $500m 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 six billion dollars.”

“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.

He therefore appealed to the federal government to urgently make foreign exchange available for its members in other to avoid being blacklisted. “This can be done by forging a joint working group with the Federal Ministry of Finance and the Central Bank of Nigeria to brainstorm and cross-fertilise ideas on how the nation can take exigent steps to forestall a potential backlash on the Nigerian economy and totally avoid the blacklist in the interest of safety and economic prosperity of the country.’’

 

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