Amaka Obiefuna

 

With much complaints and misconceptions by stakeholders in the aviation industry that Nigerian insurers lack the capacity to shoulder domestic airlines, the National Insurance Commission (NAICOM) in a forum on Thursday assured that the Commission is committed to aviation insurance to set in right perspective how the absolute international underwriting of aviation insurance works.

 

The Commissioner for Insurance, Olusegun Omosehin, presenting a paper at the 4th Chinet Aviacargo Conference 2024 on “The Role of Insurance in Aviation Business” in Lagos affirmed the undisputed fact that aviation insurance is international but not restricted to reinsurance and aviation pools in developed market is with the Lloyds of London as the anchor.

 

However he said; “the capacity of aviation insurance in Nigeria is regulated by NAICOM.

 

“The Commission which is the agency of the government that is responsible for maintaining stability, safety and financial soundness of insurance operators in the sector, thus closely monitors the placement of aviation risks in Nigeria.”

 

Omosehin further explained that; “the supervision of aviation insurance placements has in no doubt increased over the years, especially on very high risks that may warrant placement of a portion of the risk offshore by way of reinsurance support. In view of this, the Lead Underwriter or placement Broker is expected to seek the National Insurance Commission’s “Approval in Principle” to place the excess of the available Local Capacity offshore.

 

“In this instance NAICOM as the regulator is privileged to see the entire process from provisional stage of product packaging to the actual consummation of the contract and placements.”

 

The local capacity policy is created by an Act to develop the local market, making it the primary source in the process of the placement that traditionally would end in the Lloyds being the holding risk bearer for large chunks of international aviation risks.

 

In addition, NAICOM through its prudential regulations had specified minimum prudential standards for underwriting, reinsurance, investments, reserving, and outsourcing.

 

The prudential guidelines the Commissioner explained also deals with aviation insurance and returns, with the ultimate intention of protecting consumers and stakeholders in the industry, ensuring a safe and stable insurance industry, as well as boosting confidence in the sector.

 

He listed some of the prescribed minimum prudential standards that guide activities in aviation underwriting in Nigeria to include but not limited to the general requirements that all aviation insurance business shall be conducted in accordance with extant insurance laws and other relevant
regulations.

 

He also emphasised the need to ensure that establishment of underwriting terms and conditions for any aviation and its associated risks in Nigeria are the responsibility of an insurer duly licensed to transact insurance business in Nigeria.

 

However, he said this is without prejudice to an insurer’s need to seek expert advice from its reinsurers for appropriate risk rating/pricing.

 

Still on the steps taken to protect aviation risks, Omosehin said all underwriting firms are required to ensure that all aviation insurance transactions are conducted in compliance with Contract Certainty principles and requirements; amongst which all aviation insurance liability policies for any Nigeria domiciled risk are to conform to the minimum Passenger Liability Limit as required by the Nigerian Civil Aviation Authority (NCAA).

 

On the responsibility of the underwriters prior to engaging the risk he said every insurer and/or coinsurer shall, prior to accepting, signing and/or stamping any Aviation Insurance policy/schedule of coinsurers, carry out Risk Measurement and Exposure Assessment vis-a-viz its available capacity.

 

He therefore appealed to all stakeholders in the aviation sector to see the bigger picture of growing linked industries beyond the immediate individual gains, but rather, collectively growing an economy that is sustainable and self-reliance to absorb shocks.

 

The NAICOM boss said insurance place in the system should therefore, be seen beyond just financial protection, to one that is a very critical part of the economy. The entire insurance value-chain is intended to enhance efficient allocation of resources in market-oriented economies everywhere.

 

Pushing it more he stated that specifically, it is noteworthy that insurance companies facilitate investment in infrastructure and high-risk/return activities, by generating sources of long-term finance, manage high-risk exposures as well as help stimulate the growth of debt and equity markets.

 

He noted that NAICOM as the regulator of the industry is committed to to operators both in the insurance and aviation industries.