Insurance and reinsurance

Captive insurance

Summarise any captive insurance regime in your jurisdiction as applicable to aviation.

Section 72(1) of the Insurance Act 2003, which is applicable to the aviation industry prohibits the insurance or reinsurance of a risk of a property in a Nigerian business except with a Nigerian insurance or reinsurance company. This provision is interpreted and enforced by the Nigerian Insurance Commission to bar the insurance or reinsurance of aircraft or aircraft equipment with a foreign company. The Insurance Act does not provide a percentage of the risk that is required to be mandatorily insured or reinsured in Nigeria.

There are, however, situations where the National Insurance Commission (NAICOM) may permit in writing for a risk to be insured or reinsured with a foreign insurer or reinsurer upon an application of a person seeking to maintain a foreign insurance or reinsurance. Such a person must satisfy NAICOM that by reason of the exceptional nature of risk in or emanating from Nigeria or such exceptional circumstances, the risk cannot be placed with an insurer or reinsurer in Nigeria.

The Insurance Act does not restrict the insurance or reinsurance of risk in Nigeria to any particular insurance or reinsurance company or group of insurance companies. A person is therefore at liberty to spread the risk among different insurance or reinsurance companies. In practice, a percentage of aviation risk is retained in the Nigerian market and is spread among insurance companies. The bulk of the risk is reinsured with foreign reinsurance companies.

Cut-through clauses

Are cut-through clauses under the insurance and reinsurance documentation legally effective?

There is no prohibition of cut-through clauses under the Insurance Act, and in the absence of such prohibition, cut-through clauses are legally effective in Nigeria.

Reinsurance

Are assignments of reinsurance (by domestic or captive insurers) legally effective? Are assignments of reinsurance typically provided on aviation leasing and finance transactions?

Yes, an assignment by an insurer or reinsurer subject to the terms of the contract would be legally effective.

Liability

Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?

The owner, lessor or financier of an aircraft is in the eye of the law a distinct legal entity from the operator of the aircraft. Unless where there is an agency relationship, the former is not liable for the activities of the latter. There is no provision of the law that imposes such liability.

Strict liability

Does the jurisdiction adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft?

There is no provision for strict liability for owners, lessors, financiers with no operational interests under the CAA or the extant regulations.

Third-party liability insurance

Are there minimum requirements for the amount of third-party liability cover that must be in place?

The minimum amounts of third-party insurance cover to be maintained by aviation service providers are specified in the NCAR. The minimum amount of third-party cover required to be maintained by aviation service providers under the regulations depends on whether the aircraft involved is a fixed wing aircraft or rotary wings aircraft and range from US$375 million to US$150 million.