Falling naira: NCRIB urges airlines to patronise local insurance brokers
The Nigerian Council of Registered Insurance Brokers has highlighted the need for airlines in the country to embrace insurance services offered by local insurance brokers amid the instability of the naira-dollar exchange rate.
The Executive Secretary and Chief Executive Officer, NCRIB, Tope Adaramola, told our correspondent that the current exchange rate might affect airlines paying premiums to foreign insurance companies.
According to the International Air Transport Association, in 2021, insurers intend to again increase insurance rates, and the degree of increase will depend on whether airlines can provide evidence of the kind of risk management that gives insurers the confidence to differentiate specific clients from the pack.
It said, “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.”
According to IATA, common causes of claims from aircraft owner/operators include pilot error, damage from foreign objects, bird strikes, weather events, ground handling incidents and geopolitical instability.
Adaramola said, “Airlines that do not know the value 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.”
Explaining the relationship between local airlines and insurance companies, he said, “It is not a corporate relationship. It is a relationship between two parties. A relationship between a specific underwriter – that is the insurance company – and the aviation company. There is no formal relationship between an aviation corporate and the insurance body corporate.
“There are several areas where insurance is of value to aviation or to the airlines. 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.”
According to Adaramola, there are lots of benefits for airlines that embrace insurance services.
He said, “Aviation has a lot of benefits to derive by undertaking insurance. There are some insurances 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.
“The exchange rate of the naira/dollar is killing. 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.”