… assures of NAICOM’s commitment to aviation
The Commissioner for National Insurance Commission (NAICOM), Mr. Olusegun Omosehin, has corrected the misconception that the insurance companies in Nigeria lacked capacity to successfully insure aviation business, especially aircraft acquisition.
This is just as he pledged the commitment of the body to the aviation industry.
Omosehin was speaking on “The Role of Insurance in Aviation Business” at the 4th Chinet Aviacargo Conference 2024 on Thursday in Lagos.
According to him, the resort to re-insurance was in line with global best practices, where all underwriters had existing treaties with re-insurance companies.
NAICOM is the agency of the government saddled with the responsibility of maintaining stability, safety and financial soundness of insurance operators in the sector, thus it closely monitors the placement of aviation risks in Nigeria.
Omosehin assured that the insurance companies in the country had the capacity to insure all aspects of the aviation industry, including airlines, cargo, catering and others and are regulated by NAICOM.
He revealed that Nigeria has at least 29 aviation underwriters regulated by NAICOM in compliance with the regulations of the Nigeria Civil Aviation Authority (NCAA).
Omosehin assured operators in the aviation industry not to panic, that their risks were being insured in Nigeria.
“We ensure the stipulated standards are met. Every year, by January, we review the reinsurance treaties of every underwriter in this market to be sure it meets with global standards, and it is on that basis that we approve their treaties and they are then allowed to operate.
“The reality of aviation insurance is that it is a global business, like risks emanating from one country, criss-crossing its borders, and many of them oftentimes end up in Lloyd’s of London, and this is not peculiar with Nigeria. Other countries, even risks emanating from the US, would end up in Lloyd because they have a great appetite for aviation risks, and that is why they are re-insurance,” he explained.
Omosehin pointed out 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 the regulator (NAICOM) 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.”
The NAICOM Commissioner added that the body through its prudential regulations had specified minimum prudential standards for underwriting, reinsurance, investments, reserving, and outsourcing.
He also explained that the prudential guidelines deal with aviation insurance and returns, with the ultimate intention of protecting consumers and stakeholders in the industry, ensuring a safe and stable aviation industry, as well as boosting confidence in the sector.
Omosehin 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 requiring that all aviation insurance business shall be conducted in accordance with extant insurance laws and other relevant regulations.
He 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 pointed out that this is without prejudice to an insurer’s need to seek expert advice from its reinsurers for appropriate risk rating/pricing.
On further 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 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.
In view of this, he urged all the stakeholders in the aviation industry 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-reliant to absorb shocks.