NAICOM chief takes up gauntlet, advocates for local aviation insurance 

• Pushes for local content provisions

• To support growth of the specialised business

Festus Keyamo (middle), minister of aviation and aerospace development, in warm handshake with Olusegun Ayo Omosehin, commissioner for insurance and chief executive officer, National Insurance Commission (NAICOM), flanked by Olubunmi Kuku (second right), managing director, Federal Airports Authority of Nigeria (FAAN); Ekerete Ola Gam-Ikon (first left), deputy commissioner for insurance, finance and administration; and Usman Jankara Jimada, deputy commissioner of insurance, technical operations, during a recent visit by the senior management team of NAICOM to the minister, in Abuja

Cynthia Ezekwe

Olusegun Ayo Omosehin, the commissioner for insurance (CFI) and chief executive of the National Insurance Commission (NAICOM), in his quest to elevate the aviation insurance industry and ensure the safety and security of Nigeria’s local airlines and aviation businesses, has called for an infusion of local content into aviation insurance policies. This, he believes, will not only catalyse the growth of the industry but also strengthen its ability to manage risks and protect the assets of local stakeholders, a vital component of the sector’s continued success and expansion.

Omosehin underscored the importance of incorporating local content provisions in aviation insurance policies during a recent courtesy call on Festus Keyamo, the minister of aviation and aerospace development, in Abuja.

Local content provisions in insurance entail regulations or incentives that encourage insurance companies to utilise local resources, invest in local economies, create products tailored to local needs, and forge partnerships with local businesses and organisations. These provisions aim to harness the local expertise and resources available, fostering economic development, promoting the growth of the insurance industry, and meeting the specific needs of local stakeholders.

In the context of aviation insurance, local content provisions  includes partnering with local airlines and aviation businesses to develop customised insurance products, using local adjusters and surveyors to assess claims, investing in local training and capacity-building programmes for insurance professionals, using local reinsurers or brokers to support local economic development, as well as developing insurance products that address unique local risks or challenges

Dwelling on this, Omosehin underscored the necessity of capacity building, noting that local insurers must undergo training to effectively manage the unique risks associated with aviation insurance. He explained that implementing regulatory measures for local content provision in aviation insurance would not only support the growth of the sector but also bolster risk management practices within the industry.

According to the commissioner for insurance, local content provision will enhance risk management practices, promote local economic growth and development, enhance local expertise and capacity, improve access to insurance coverage for local businesses and individuals, encourage innovation and tailored insurance solutions, and reduce reliance on foreign insurers and reinsurers.

While acknowledging the importance of capacity building, regulatory support, and collaboration, Omosehin noted that these factors currently present major hurdles in achieving successful local content provision in Nigeria’s aviation insurance sector.

To address these challenges, he stressed on the urgent need to implement regulatory measures and industry-wide initiatives that will facilitate local content provision in Nigeria’s aviation sector.

The NAICOM chief also argued that a concerted effort from both the regulatory and industry stakeholders is critical for creating an enabling environment that supports local insurers, promotes capacity building, and incentivises collaboration with international experts.

Responding to Omosehin’s remarks, Keyamo acknowledged the importance of local content but noted a significant challenge, which is the inability of  the local insurance market to handle the risks associated with dry lease aircraft arrangements. He  explained that most local firms would need to seek reinsurance in the international market, which would increase costs for local airline operators.

According to Keyamo, the risk exposure in the aviation sector is so significant that even after local insurers underwrite the risk, they would need to seek reinsurance in the international market, incurring additional costs for local operators. This, he explained, underscores the importance of supporting the growth and development of the local insurance market, through capacity building and collaboration, to better manage the complex risks associated with the sector.

Keyamo  also clarified that the concerns raised by international lessors and manufacturers regarding the local insurance market’s capacity to handle risks associated with dry leases are significant barriers to aircraft delivery to Nigeria.

He insisted that this issue must be resolved before international players will be willing to deliver aircraft to the country, stressing the need for increased local capacity building and risk management expertise.

In aviation, a dry lease refers to any leasing arrangement whereby an aircraft is leased to another party without any additional services or crew” provided by the lessor (the aircraft owner). In a dry lease, the lessee (the party leasing the aircraft) gains possession and control of the aircraft, but they are responsible for all the operational aspects, including flight crew, maintenance, insurance, fuel, and other operational expenses.

According to the aviation minister, the international lessors and manufacturers are insisting that they will not bring aircraft into Nigeria if the risk is placed in the local market, as they argue that the risk must be placed in the international market.

Keyamo, cognisant of the concerns raised by international lessors and manufacturers, disclosed plans to initiate discussions with NAICOM to consider an exception for dry lease insurance in the aviation sector.

The minister proposed that, while all other aviation-related insurance should remain local, a potential carve-out for dry lease insurance could help alleviate international players’ concerns.

Keyamo further articulated that addressing the insurance issue and amending legal guidelines to prevent the issuance of injunctions that hinder lessors from repossessing aircraft in case of dry lease defaults, would create a more inviting environment for international lessors and manufacturers to bring their aircraft to Nigeria under dry lease arrangements.