Why Nigerian Airlines Pay High Premium on Aircraft Insurance

ThisDay

Managing Director of Arik Air, Chris Ndulue

Chinedu Eze

The Managing Director of Arik Air, Chris Ndulue has said that insurance companies’ assessment of Nigeria as high risk country might be responsible for the relatively high insurance premium Nigerian airlines pay for their aircraft.

Ndulue disclosed this to THISDAY on Tuesday when a team of underwriters visited the airline from London to inspect facilities at its operational headquarters.

He said that Nigeria is wrongly perceived as high risk country because of the activities of insurgents who operate at only one section of the country, adding that this might have influenced the high aircraft insurance cost in the country.

“The premium on aircraft insurance paid by airlines is something that is decided on case by case basis and it reflects the insurance company’s assessment of the risk. So if they think your risk is high, your premium is bound to be high and if they think my risk is lower, my premium will be lower.

“The only thing that will make a difference between insurance premium in Nigeria and in South Africa is country risk. Nigeria’s may be high because it will reflect the insurer’s perception of the country risk. If Nigeria’s insurance premium is higher than that of South Africa then insurance companies have assumed that Nigeria’s country risk is higher than that of South Africa.

“International perception of Nigeria is unfavourable but Nigeria is not as bad as it is perceived to be. If you don’t check that very well you pay a country risk that is far higher than what you should pay, especially with the issues of Boko Haram,” Ndulue said.

He remarked that it was to counter such negative perception that prompted the airline to invite its underwriters to Nigeria to see things by themselves.
“That is why today our underwriters from London insurance market visited to see that we are running a world class airline here. We are much bigger and ahead of many airlines in Europe. They can only see that when they come here. It will be difficult to convince them otherwise.

“We have our operations control centre (OCC) which is ahead of what the majority of airlines in Europe has. So they come here and they see it for the first time, even though they have been to airlines’ headquarters in Europe, they have not seen this in many of them before,” the Arik Managing Director said.

Ndulue believed that after the personal experience of coming to Nigeria and looking at things and the security level in Lagos and other parts of the country the team would have a better understanding of Nigeria in terms of security profiling and risk assessment.

“We showed them our maintenance facility, we showed them where the Lufthansa Technic personnel are and we showed them our ground staff training school. We showed them what we are doing here and how we even manage our aviation security and they realised we are nothing less than the best airline they found in Europe.

And we let them know that this is Lagos and that it is safe. There is nothing happening here; there is no war here but there is insurgency in Borno state and sections of north east, but that does not mean that the whole country is insecure ,” Ndulue said.

The 'official' method to make your pension cash last a lifetime

The Telegraph

By Katie Morley

Government-backed pension provider Nest – the National Employment Savings Trust – has outlined radical proposals that will give savers using the scheme low-cost, flexible access to their pension cash. 

It has also outlined an “automatic” process by which all savers, on reaching a series of age triggers, will be channelled into investments that both safeguard their cash to provide future income and enable savers to spend it as needed. 

The plans, published today, go some way towards meeting the aims of this newspaper’s Make Pension Freedoms Work campaign. First, they pave the way for Nest to become a benchmark in low-cost, flexible pension access – currently being denied to many. 

Second, Nest’s proposals offer a solution to the problems posed by “lifestyle” funds. As we reported last week, these funds, which hold billions of pounds of pensioners’ savings, were built for savers who would buy annuities on fixed retirement dates – rather than, as now, a flexible retirement where cash can be drawn or invested as savers wish. As a result of this, many such funds are exposing savers to unnecessary market risk. 

• Pension freedom flaw: 750,000 savers lose 9pc in four months 

• Make pension freedoms work: our five demands

Nest’s research concluded that once savers finally did retire, their money should be managed in three phases linked directly to their age. 

Its proposed solutions take into account factors including longer working lives, and assume most savers will have a 30-year-long retirement. 

Nest came into being as part of the introduction of “automatic enrolment” into workplace pensions, a policy partly based on Australian experience. 

The shape of retirements to come? 

The first phase envisaged by Nest is “early retirement”, spanning the decade between someone’s mid-60s and early 70s. 

According to its chief executive, Otto Thoresen, at this stage “most savers don’t really know what kind of income they need from their retirement pots now or in the future. So it doesn’t make sense for them to lock their money up in a guaranteed income, such as an annuity. A flexible approach will suit most people best.” 

As a result, Nest’s default options would see the money left invested. The portfolio would be designed primarily to protect savers’ money from inflation, so the majority initially would be in shares and commercial property. But there would be two crucial additional features to this stage. 

Around 10pc of savers’ pension pot would be kept in cash as an “emergency fund” which could be accessed instantly, at little or no cost to the saver. 

Secondly, a small portion of the money (between 1pc and 2pc per year) should be saved in a separate pot, building up a reserve which in future years – when the saver’s financial situation has settled and there is a clearer picture – can be used to provide an income. 

In the second phase, when someone is in their mid-70s to early 80s, savers would continue to take a flexible income from their invested capital. But Nest recommends that the money that has been set aside for later life income should now be “locked in” to stop savers dipping into it. This provides a greater degree of security and certainty that an income will be paid for the remainder of an individual’s life. 

In effect, it becomes a safeguard against the risk of “outliving” your savings. 

And in the final phase, when savers reach their mid-80s and for those who live into their 90s, their money would be converted into an income stream for life through the purchase of an annuity. 

• 'Australians got pension freedom and they are running out of money'

• Pension freedoms to yield £1.2bn tax windfall for Treasury

Nest’s research found that buying an annuity in your 80s offers better value for money than buying one in your 60s. It also found that savers in their 80s no longer wanted to take investment risk and therefore preferred the certainty of an annuity. 

As this newspaper has repeatedly highlighted, millions of pension savers who want flexible access to their money are being, in one way or another, barred from free access to their pension cash. 

Until recently buying an annuity has been the default option for millions of over‑55s but in April the Government introduced new flexibilities which – in theory – mean savers are no longer forced into buying a guaranteed income. Instead, they now have unfettered access to their money as well as a wider range of options to keep their cash invested to save or spend as they like. 

Nest’s vision is to create a simple, hassle-free path to pension freedom so every saver. 

- katie.morley@telegraph.co.uk

Pension changes must not be rushed, insurers say

Plans to allow pensioners to sell their annuities for cash must not be rushed through, insurers have urged.

The government wants to extend the pension overhaul to allow pensioners to sell back their annuity - a fixed retirement income - to providers.

But a trade body says the proposed April 2016 start date puts people at risk of scams.

It said lessons should be learned from recent pension changes that allowed people to cash in a pension pot.

Under those rules, which took effect in April this year, many people aged 55 and over have been able to cash in their pension savings rather than buying an annuity.

The latest proposals would allow five million pensioners who have already bought an annuity with their pension pot to sell it back.

Pension Calculators

State pension calculator DWP

Combined state, workplace and DC calculator, from Standard Life

Should I delay buying an annuity? Hargreaves Lansdown 

How much can I earn from a DC pot? Money Advice Service

The Association of British Insurers (ABI), which represents insurers who manage pension money, said that the rights of pensioners' dependents needed to be protected.

The scope of the proposals needed to be more clearly defined, it argued in its response to government consultation, including whether annuities could be sold back to the provider, but without an obligation on that provider to agree to the deal.

"Naturally there are considerable challenges in establishing a functioning market, and many unresolved complex legal, regulatory and prudential questions," said Yvonne Braun, of the ABI.

"We want to work with government to help resolve these issues, but given the lessons learned from the [recent] reforms and the need for clarity in many areas, we urge the government not to rush these proposals through for 2016. 

"Allowing more time will ensure an appropriate regulatory regime can be developed to give this new market a chance to succeed."

The new Pensions Minister, Ros Altmann, recently told the BBC she firmly supported the plan for a secondary annuities market. 

A spokesman for the Treasury said: "We are removing restrictions on selling annuity income so that the five million people who have already bought them have the same freedom as everyone else."

Parametric insurance in Africa on the rise

IHS Maritime 360

Dramatic climate changes have increased investment opportunities for insurance companies keen on providing parametric insurance products to the African market.

Climate insurance, though a new concept in some of the emerging markets, could help mitigate impacts of weather changes not only on the agricultural sector but also on marine transport infrastructure and logistics.

Swiss company CelsiusPro's CEO Mark Ruegg told participants at 5th annual African Insurance and Reinsurance in Nairobi this week that the African insurance market potential is huge despite "current penetration being small."

He said to expand the weather insurance index in Africa and other emerging markets it will require insurers to offer "expertise in structuring and tailoring products that effectively mitigates the effects of weather, climate change and other natural perils."

Ruegg said the use of appropriate software in parametric insurance, will enable policy cover providers to "effectively service clients with parametric products ranging from risk modeling, pricing, execution to policy lifestyle management."

He said the use of big data from satellites, ground measurement devices and additional data providers is critical in designing "smart products and giving climate smart advice."

However, Ruegg said offering parametric large scale insurance in some markets could face the challenge of sourcing relevant data, designing of appropriate products, effective pricing and dealing with huge number of policies.

Climate change and weather trends could influence the depth of the sea, extent of sea ice and could also trigger floods, which are known occasionally to block shipping channels or amass silt and debris that makes shipping channels shallow, which is expected to have an increasing impact on insurance trends in Africa going forward.

Brazil's Caixa says to offer 25 pct of insurance unit in sale plan

BRASILIA, June 26 Brazilian state-owned lender Caixa Econômica Federal said on Friday its board approved a plan to sell 25 percent of the stock in its insurance unit to investors.

The government has said it wants to sell the stock in Caixa Seguridade Participações SA this year to collect some of the extra revenue it needs to meet its fiscal targets. (Reporting by Alonso Soto; Editing by Chris Reese)

Old Mutual Nigeria hosts brokers evening

Chuks Udo Okonta

Old Mutual Nigeria, a leading multinational Insurance underwriting firm is extending its horizon of relationship with insurance brokers by opting to host the June 2015 edition of the Insurance Brokers Members’ Evening on Tuesday, June 30, 2015. 

A statement by Assistant Manager, Corporate Affairs, Nigerian Council of Registered Insurance Brokers (NCRIB), Dele Ayeleso, said the venue Of the vent  is the Insurance Brokers House, 58, Moleye Street, Alagomeji Yaba, Lagos starting from 3.00pm.

He noted that to give a unique touch to the event, the company has disclosed its intention to inch up the value of the event by hosting a free lecture for insurance brokers under the aegis of the NCRIB on International Financial Reporting Standard (IFRS).

It is expected that Accountants, internal Auditors and related staffers of the companies will benefit from the training which will enhance the compliance level of members with the financial regulation, he said.

He said the Members’ evening will afford Old Mutual the opportunity to cross fertilise ideas with Brokers with view to enhancing the market share of the company, stressing that the Nigerian Insurance market is often referred to as Brokers market, given the fact that the professional intermediaries control more than 70 per cent of insurance business in the market. 

Meanwhile, the Eastern Area Committee of the NCRIB will on Friday, July 3, 2015 hold the inauguration of its new executives in Aba, Abia State.

The event will feature the installation of Mr. Geofrey Uzoagbaraas  Chairman and feature the attendance of  the state Governor, Dr. Okezie Ikpeazu  as well as Enyi 1 of Aba, Chief Eze Ikonne. The inauguration lecture titled: “Positioning Yourself for Greater Opportunity” will be delivered by Dr. Segun Olatunji, a renowned Consultant and Director, Nigerian Tribune Newspaper. 

The incoming Chairman,  Uzoagbara has noted that the focus of his tenure would be to deepen insurance awareness  within the seven state and institute welfare schemes for members within the zone. 

Book on essentials of engineering insurance for launch

Chuks Udo Okonta

The knowledge base of the Nigerian Insurance Industry will soon be buoyed with the public presentation of the book; "Essentials of Engineering Insurance,"

authored by former Managing Director of ACEN Insurance Company Limited, Emmanuel Oyetoyan.

The public presentation will be held on Thursrday, July 2, 2015 at the Nigerian Council of Registered Insurance Brokers, Alagomeji, Yaba, Lagos, starting from 10.00am.

The book is borne out of the desire of the author to further give back to the insurance profession by enriching the knowledge base of the industry in technical areas where he had made a mark in the last 35 years of service to the industry. 

According to Oyetoyan, it is a known fact that the Nigerian and African Insurance industry has continued to witness a down turn in its fortunes due to dearth of knowledge and adherence to sound underwriting principles which the book is meant to correct.

The seminal publication features valuable topics such as premium rating; risk assessment and claims handling. Other aspects are technical surveys and inspection as well as insurance broking and loss adjusting.

The Deputy Chairman of Hogg Robinson Nigeria, Mr Amos Adeyeye is the Chairman of the event while Mr Sammy Sotomi, former President of the Institute of Loss Adjusters of Nigeria (ILAN) is the Chief Presenter alongside the Commissioner for Insurance, Fola Daniel.