Over the last year, Nigeria has suffered from a dearth of foreign exchange due to the collapse in global oil prices, hitting airlines hard. Due to a combination of aviation fuel scarcity, limited foreign exchange, a collapse in passenger numbers and high maintenance costs as they bring their facilities up to international standards, most Nigerian airlines have been unable to afford their usual annual insurance packages.
Nigeria's no premium, no cover’ policy enforced by the National Insurance Commission (Naicom) has forced operators in the aviation sector to take up monthly insurance for their fleet. This measure was introduced by Naicom in 2013 due to the huge outstanding premiums owed many insurers.
Aviation insurance took up a huge chunk of the outstanding premiums before 2013 due to the fact that airlines buy insurance cover on an annual basis but do not pay premium until later into the year. Some do not even pay at all if any of their airplanes is not involved in a crash, which not only increased the credit risk of insurers but also introduced uncertainty in the market.
Consequently, only insurance covers for which full premium have been received in advance, either directly by the insurer or through a duly licensed insurance broker, are recognised in the eyes of the law. Accordingly, no insurer can grant insurance cover without having received full premium or premium receipt notification from the relevant insurance broker.
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