NIGERIA Law and Practice Contributed by: Tamuno Atekebo, Chinasa Unaegbunam, Naomi Kabowei and Favour Osayuwamen, Streamsowers & Köhn
2.5 Insurance and Reinsurance 2.5.1 Requirement to Engage Domestic Insurance Companies In Nigeria, even though it is mandatory for carriers operating air transport services to and from Nigeria to maintain relevant insurance, it is not mandatory for all the insurance coverage to be obtained from a domes - tic insurance company. 2.5.2 Mandatory Insurance Coverage Requirements The CAA 2022 imposes mandatory insurance cover - age requirements. The specific range of insurance that should be maintained is set out in Part 18 of the Nig. CARs, which establishes the minimum insurance sums based on the maximum take-off weight (MTOW) of a fixed-wing aircraft or a rotary-wing aircraft. The mini - mum insurance cover for aircraft operating in Nigeria must correspond to the aircraft’s available capacity. 2.5.3 Placement of Insurance Outside of Jurisdiction 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 National Insurance Commission (“NAICOM”) to bar the insurance or reinsurance of air - craft or aircraft equipment with a foreign company. The Insurance Act 2003 does not provide a percentage of the risk that is required to be mandatorily insured or reinsured in Nigeria. However, there are circumstances whereby the NAI - COM may permit a risk to be insured or reinsured with a foreign insurer or reinsurer, following an application by a person seeking to maintain foreign insurance or reinsurance. In such circumstances, the applicant must satisfy NAICOM that as a result of the excep - tional nature of the risk, the risk cannot be placed with an insurer or reinsurer in Nigeria. The Insurance Act 2003 does not restrict the insur - ance or reinsurance risk in Nigeria to any particular insurance or reinsurance company or group of com - panies. Thus, a person seeking to obtain insurance or reinsurance is 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, while the bulk of the risk is reinsured with foreign reinsurance companies. 2.5.4 Enforceability of “Cut-Through” Clauses Cut-through clauses in insurance/reinsurance agree - ments are enforceable in Nigeria. 2.5.5 Assignment of Insurance/Reinsurance Assignment of insurance and reinsurance is permitted subject to the terms of the contract. 2.6 Lease Enforcement 2.6.1 Restrictions on Lessors’ Abilities There are no restrictions on a lessor’s ability to termi - nate an aircraft lease or re-export the aircraft and/or sell the aircraft following such termination. Once the lessor terminates in line with the lease agreement, an application can be made to the NCAA for the deregis - tration of the aircraft and subsequent export. There is also no requirement under the law that the aircraft must be physically located in Nigeria at the time of such action by the lessor. 2.6.2 Lessor Taking Possession of the Aircraft Where the lease is constituted as an international interest under the Cape Town Convention and the les - see has executed an irrevocable deregistration and export request authorisation (IDERA), a court order is not required for the lessor to take physical possession of an aircraft subject to a lease. The lessor can take physical possession of the aircraft by presenting the IDERA to the NCAA and deregistering and exporting the aircraft out of Nigeria. A lessor who has a deregistration Power of Attor - ney (DPOA) may also take physical possession of an aircraft without the lessee’s consent and a court order. Notably, a DPOA does not carry the same legal authority or international recognition as an IDERA. Where these instruments do not exist, a lessor must obtain a court order to take physical possession of an aircraft without the lessee’s consent.
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