Aviation industry stakeholders have called on the National Insurance Commission (NAICOM) to review its insurance policy that currently requires airlines to pay double premiums for insuring certain leased aircraft in Nigeria. The demand was made during the Chinet AviaCargo 2024 conference, held at the Marriott Hotel in Lagos over the weekend.
Currently, Nigerian airlines are required to pay double premiums on some leased aircraft due to conflicting insurance requirements. While international lessors often insist that these aircraft be insured by reputable international insurance companies, NAICOM mandates that the same aircraft be insured locally, in line with the Federal Government’s local content policy. As a result, airlines find themselves paying twice for the same coverage.
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Stakeholders at the conference, including Captain Edward Boyo, Chief Executive Officer of Overland Airways, called for a policy review, arguing that the existing laws are counterproductive to the aviation industry. Captain Boyo noted that these regulations, designed in different economic environments, now hinder the growth of the industry.
“Some of these rules, regulations, and laws work against the industry they were made for. The economic environment was different when these laws were created. We need to consider the comparative advantage of nations. Nigeria lacks the capacity to produce or fully finance aircraft, and the local insurance requirement is now restricting the market,” Boyo stated.
In response, the Commissioner for Insurance and CEO of NAICOM, Segun Ayo Omosehin, emphasized that the local content policy is designed to protect Nigeria’s economic interests. He highlighted the success of similar policies in the oil and gas sector, where local insurers now play a significant role in the industry with the backing of international re-insurers.
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“The local content policy aims to protect the economic interests of the nation. We have seen success in the oil and gas sector, where local insurers, with support from international re-insurers, now handle a substantial portion of the business. The same concept applies to aviation,” Omosehin explained.
However, due to Nigeria’s designation as a high-risk country, international lessors demand that their leased aircraft, especially wide-body types, be insured with well-established international insurance companies. This has led to significant financial strain on Nigerian airlines, which spend approximately $2 billion annually on aircraft insurance with local insurers.
Stakeholders proposed that NAICOM consider a concession for these particular aircraft types, allowing airlines to insure them solely with the international companies recommended by the lessors, while still maintaining local insurance for the rest of their fleet. This, they argue, would alleviate the financial burden on airlines and encourage growth in the aviation sector.
