In order to protect policyholders and members of the public, the National Insurance Commission (NAICOM) has ordered that the establishment of underwriting terms and conditions for any aviation and its associated risks in Nigeria must be the responsibility of the insurers transacting business in the country.
The insurance operators were, however, given the freedom to seek expert advice from their facultative reinsurers for appropriate risk rating/pricing.
This directive was contained in a new circular to all insurance institutions signed by NAICOM’s Director (Authorisation and Policy), Pius Agboola on behalf of the Commissioner for Insurance, Fola Daniel.
NAICOM also warned that “Failure to comply with the provisions of this circular, shall in addition to imposition of penalties, result in the insurer being banned from writing further business in this class and may lead to the suspension or withdrawal of its licence”.
The circular reads in part: “All aviation business shall be conducted in accordance with insurance laws and other relevant regulations.
“The establishment of underwriting terms and conditions for any aviation and its associated risks in Nigeria shall be the responsibility of an insurer duly licensed to transact insurance business in Nigeria. This is without prejudice to an insurer’s need to seek expert advice from its facultative reinsurers for appropriate risk rating/pricing.
“An insurer shall ensure that all aviation insurance transactions are conducted in compliance with contract certainty principles and requirements.
“An aviation insurance liability policy for any Nigeria domiciled risk shall conform to the minimum passenger liability limit as required by the Nigerian Civil Aviation Authority”.
Every insurer and coinsurer shall, prior to accepting, signing, and or stamping any aviation insurance policy/schedule of coinsurers, to carry out risk measurement and exposure assessment viz-a-viz its available capacity, NAICOM noted.
NAICOM further stated that the net retention/deductible of an insurer under any treaty, on per risk basis, shall not constitute more than 5 per cent of its shareholders’ fund.
Besides, every insurer is required to submit to the commission, its board approved maximum exposure limit/risk appetite (in numeric terms) on all aviation risks acceptances and its aviation insurance treaty for the following year on or before December 15 of every year or 15 days before effective renewal date for those whose treaty renewal dates do not fall on January 1st.