By Nike Popoola

Twenty-three Nigerian underwriting companies participated in insuring two Nigerian satellites, which were launched into space last week. NIKE POPOOLA writes on the content of the insurance contract and the effect this will have on the sector.

Last week, when Nigeria launched two satellites into space in Yasny Russia, the local insurers were delighted because the event gave many of them the opportunity to become space underwriters.

Nigeria SAT II and Nigeria SAT NX were two of the seven satellites from different countries that were launched into space by a Ukrainian rocket. The rocket immediately returned to earth after successfully completing the assignment.

Sources close to the insurers of the satellites told our correspondent that they were insured by a consortium of 23 Nigerian insurance companies and some foreign reinsurers for £30m (N7.5bn), and their premium was fully paid before the launching of the satellites.

Our correspondent gathered that Lasaco Assurance Plc led the consortium of underwriters that insured the second phase of the country’s satellite launch.

Each insurance company was only allowed to take a little of the risks that it could carry based on its capacity.

The National Space Research and Development Agency contracted the construction of Nigeria SAT II to a United Kingdom -based company, Surrey Satellite Technology, while Nigeria SAT NX was constructed by Nigerian engineers, under close monitoring, after they were trained in the United Kingdom for 18 months.

Nigeria SAT II, which is the bigger satellite, weighs 270 kilogrammes, while Nigeria SAT NX, said to be truly Nigerian, weighs 87kg.

The two imaging satellites, now move round the earth from the North Pole to the South Pole, and are expected to last in space for a period of seven years.

However, as the underwriting companies are still very new in the business, it was learnt that the National Insurance Commission ensured that they were not exposed to much of the risks. It allowed them to take 30 per cent of the risks, while the remaining 70 per cent were reinsured abroad.

This was despite the claim by local insurers that they had a benchmark of 70 per cent to underwrite the risks.

But NAICOM justified its restriction, saying it was based on the fact that the companies were yet to understand the operations of the risks, coupled with the fact that the terms and agreements in the policy were dictated by foreign underwriters who were the specialists in the business.

Also, the local underwriters lacked the database to guide them in ascertaining the peculiarity of such risks.

The insurance policy statement, our correspondent gathered, covered risks, which included losses, damages or poor information from the satellites during the launch and while in orbit.

The two satellites were successfully launched into space in less than one minute and it was a gladdening event for the insurers because no loss was recorded on the occasion.

However, as the satellites are now in space, the insurance policy still covers them in orbit for the next 12 months over the risk of loss or damage, the failure of the satellite to produce image or quality information and also inability to perform up to desired expectation.

Also covered under the risks in orbit are the costs of corrective measures; that is, if the satellites do not perform up to expected speed, they can be corrected from the earth but the cost of such corrective measures will be carried by the insurers.

The loss in orbit can either be total, partial, or constructive, that is, when the loss is up to 75 per cent of the value of the policy insured.

The local underwriters, our correspondent gathered, were able to participate in the insurance of the satellites due to the support that they enjoyed from the Federal Government, the Ministry of Science and Technology and NASRDA.

The Director -General, Nigerian Insurers Association, Mr. Sunday Thomas, noted that the involvement of the insurance companies in space insurance would bring global technology and technical capacity into the country.

“In the past few years, the industry may not have been reckoned with in this business, but this achievement will widen the scope of technology and expand the knowledge and technical capacity of the companies,” he said.

A consultant to NAICOM, Mr. Yemi Soladoye, noted that space insurance was a special risk like aviation and marine hall insurance policies.

Soladoye, who observed that the satellites were launched in Russia, said that it was a risk of international dimension, which would not be governed by Nigerian law but needed the pooling of resources together.

“Space insurance requires capacity, which has to be developed in Africa over time, the exposure limit that each company will bear now will be limited, but we can also employ the approach of the local content in oil and gas business to develop capacity for that particular type of risks,” Soladoye said.

Source: Punch