The parlous state of the nation’s aviation sector is making foreign reinsurers to be strict with requests to provide cover for aircraft operating in the country, investigations have shown.
Currently, the foreign firms are responsible for reinsuring about 70 per cent of aircraft risks in the country, while local insurance companies underwrite 30 per cent.
However, our correspondent gathered that the reinsurers had developed cold feet about providing cover for jets operating in the country due to the industry’s history of air disasters.
Instead of embracing the reinsurance of the Nigerian-based aircraft as they used to do, the foreign firms have come up with stiff conditions that the indigenous airlines must meet before they can do business with them.
According to findings, some of the conditions are that the airlines will have to pay heavy premiums, improve the maintenance of their aircraft and provide better aviation infrastructure.
The local insurance companies, who are already facing hard times as they make provisions to commence the 2013 reinsurance treaties for the aircraft, have attributed the decision of their foreign partners to the poor rating of the local aviation industry, which has been categorised as highly risky following the recent crash of a Dana Air plane in Lagos.
It is a convention that the local insurance companies begin the search for foreign treaties to reinsure aircraft in their portfolio during the last quarter of every year and usually conclude such deals by December.
Investigations revealed that the local underwriters were worried by the latest development and were complaining of the stringent conditions set by the reinsuers.
The President, Chartered Insurance Institute of Nigeria, Dr. Wole Adetimehin, said as a result of the crash of the Dana aircraft, local insurers and their foreign reinsurers might be considering raising their premiums.
“When the time comes for companies to review their aviation insurance contracts, we expect a review of premium rates on the policies,” Adetimehim said.
This, according to him, will make the insurance of aircraft more expensive in the country.
The Managing Director, Anchor Insurance Company Limited, Mr. Ademayowa Adeduro, said aviation insurance business was usually done in the country through the African Aviation Pool being managed by Africa Reinsurance.
He said African underwriters usually contributed into the pool to enhance capacity on the continent.
According to him, local insurers usually have three months’ notice of cancellation or renewal of aviation treaties in order to provide insurance cover for aircraft operating in the country, a process that is usually completed before the end of the year.
Now that the local underwriters are beginning to look for foreign cover for the year 2013, Adeduro expressed worries about the poor rating of the local aviation industry by leasing companies, especially in the United States.
“The foreign reinsurers may raise their rates or withdraw their treaties. They may even tell you that there are no aviation treaties because the Nigerian aviation industry has been rated as highly risky,” he said.
According to him, the foreign underwriters will like to see improvement in maintenance of aircraft in the country and improved infrastructural facilities in the aviation sector.
Adeduro said that the age of the aircraft was, however, not a major consideration by the reinsurers.
Prestige Assurance Plc had led six other local insurance firms to insure 30 per cent of Dana Air’s risk in the country, while the remaining 70 per cent was reinsured abroad
The Managing Director, Prestige Assurance, Mr. Anand Mittal, said the company used to retain only 10 per cent of Dana’s risk in the country, but only recently increased it to 30 per cent because of the local content policy of the government.
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