THE Nigerian Council of Registered Insurance Brokers (NCRIB) has asked airlines in the country to look into insurance services offered by local firms in view of the fluctuation of naira to dollar.
The Chief Executive Officer and Executive Secretary, NCIRIB, Tope Adaramola, stated that the exchange rate would most likely affect airlines paying premiums to foreign insurance organisations.
International Air Transport Association (IATA) had said insurers planned to increase insurance rates and the height of the increase would be dependent on if airlines could provide evidence of the type of risk management that could give insurers the confidence to differentiate specific clients from the pack.
“Insurers and their clients often talk about price differentiation come renewal season, but it is not often established. Because, without evidence that documents elite safety practices, underwriters make fundamental assumptions based on intuition or common market perceptions. These assumptions can be misinformed and do not benefit airlines that invest in advanced quality and safety practices,” the IATA said.
According to IATA, the common causes of claims from aircraft owners and operators are damage from foreign objects, weather events, pilot error, ground handling incidents and geopolitical instability.
Adaramola said, “Airlines that do not know the allure of insurance brokers should begin to address their minds to it. No matter the promise that an underwriter of an insurance company may give, the broker is in a position to better advise the client, confirming the best possible rate.
“And when a claim also occurs, the insurance broker is like a lawyer who takes the burden off you, interprets the technicalities of insurance policies which are efficient to you beyond what your finance department may understand. A broker is an ally in whatever type of insurance they have chosen to adopt”.
He explained the existing relationship between local airlines and insurance companies stating that “It is not a corporate relationship between two parties. A relationship between a specific underwriter and the aviation. There is no formal relationship between an aviation corporate and the insurance corporate body.
Adaramola said insurance could offer value to the aviation industry in many areas.
He added, “There are several insurances often undertaken by virtue of the operation of the airline. You have insurance for the passengers; you have insurance also for the claim itself, for possible casualties in the event of a loss or crash, airlines companies’ staff, the professional indemnity of their pilots.
“Aviation has a lot of benefits to derive by undertaking insurance. There are some insurance that you cannot circumvent by virtue of convention; conventions like expand and international agreement. There is a uniform standard subject to these provisions of these conventions that you must subscribe to.
“Airlines are expected by law to insure in Nigeria, but where the intention of local capacity of the insurance companies cannot meet with what they want to insure, they take their insurance options outside the country.”
Adaramola described the exchange rate of the naira to dollar as killing, adding that “Aircraft or aviation companies that are operating in the UK internally, the amount of premium that is expected to be paid is relative to that country. However, the one in Nigeria is going to pay relative to the international market. That is where a lot of challenges normally come in. It is the economy.”