THE EFFECT OF AVIATION INSURANCE AND ECONOMIC GROWTH IN NIGERIA

 

 

TABLE OF CONTENT

Title page

Approval page

Dedication

Acknowledgment

Abstract

Table of content

CHAPTER ONE

1.0   INTRODUCTION

1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study

CHAPETR TWO

2.0   LITERATURE REVIEW

CHAPETR THREE

3.0        Research methodology

3.1        sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1    Introductions

4.2    Data analysis

CHAPTER FIVE

5.1    Introduction

5.2    Summary

5.3    Conclusion

5.4    Recommendation

Appendix

 

 

 

 

 

 

 

 

 

Abstract

This study investigated the effect of aviation insurance and economic growth in Nigeria. Chi-square statistics was used to test the hypothesis with the aid of statistical package for social sciences (SPSS) to determine the effect of aviation insurance on Nigeria economic growth. The researcher examines the ratio of aviation insurance premium to Gross Domestic Product (GDP). The study revealed that there was significant relationship between aviation insurance and economic growth of Nigeria. It was also discovered that despite the high degree of the causality of the relationship between aviation insurance premium and GDP, that aviation insurance premium has not been able to make a meaningful contribution to economic growth of the country. The study concluded that life aviation insurance business has not effectively contributed to the growth of Nigeria economy due to low consumption, and corporate organizations have failed to embrace life insurance policies in Nigeria.

 

 

 

CHAPTER ONE

                                        INTRODUCTION

1.1 Background of the study

Insurance companies are financial institution with the fundamental role of protecting firms or businesses and individuals from financial losses and provides invisible fund to the economy. The services of insurance company is apparently important if a nation is to protect the future of business investment which is bedeviled with risk uncertainties to be less risky and make it protection and provision of scare investment fund to the industry is been played by insurance companies in Nigeria. Aviation accidents, although infrequent, have the potential to result in large property damages and losses of human life. While there have been a number of studies that examine how airline stocks react to accidents (see, for example, Chance and Ferris (1987), Davidson et al. (1987) and Walker et al. (2005)) there has been no study to date that examines how insurance companies, which ultimately pay the bills, are affected. Our intention in this paper is to provide an overview of how the airline insurance industry works. We will take a look on how the risk is spread between insurers, how insurers treat deliberate acts of violence and, lastly, how insurers price the risk. Our paper shows that the way the aviation insurance market is structured reveals highly sophisticated risk management practices. To minimize their risk exposure, large potential liabilities are shared by means of a complicated system among several insurers. Furthermore, the study shows that the insurance market has adjusted to the post 9-11 aviation insurance realities being reasonably ready to handle events of an even more catastrophic magnitude.  Air Transport is considered to be one of the fastest means of transportation worldwide, and not only is it fast, it is also one of the most comfortable as it transport both passengers and cargoes from one point to the other thereby easing movement. It is also of the most disastrous means of transportation when involved in an accident due to the loss of lives and property involved talk less of the financial burden on the shoulder of the aircraft owners. But all thanks goes to insurance experts that has been able to help aircraft owners reduce the financial burden involved by accepting part or all of the aviation risks of the aircraft owner in return for a considerable financial payments made at certain times to help cover such aviation risks.  The underwriting of such aviation risks requires sound knowledge about air transportation in general, aviation management, aviation mechanics, aviation safety and a deep technical know-how of aviation insurance by aviation insurers. However, all these are lacking within the Nigerian Insurance Industry which is why the course titled Aviation Insurance was introduced across all tertiary institutions (polytechnics and universities) to enable future young underwriters garner the theoretical and practical experience needed to positively stimulate the Nigerian Insurance Industry. Insurance affects air carriage and the aviation sector in a number of ways. First, it can lead to high cost of air fare in situations where insurance premiums are high. Second, adequate insurance gives room for an effective system of victim compensation. Due to the liability regime of air carriers under the Montreal Convention, air carriers are only able to pay adequate compensation to victims of mishaps when insurance policies are taken out by them. Also, as insurance keeps businesses afloat, aviation insurance ensures the sustainability of air carriage in the country which in turn contributes to the Nigerian economy. Nigeria’s airspace has recorded a total of 10 air accidents in the last 20 years with the last occurring in 2013. The risks insured in the aviation insurance market are varied, but some common types of policies and coverage include aircraft manufacturer insurance, air cargo insurance, air charter insurance, aerobatic or experimental aircraft insurance, airline insurance, airport or ground handler insurance, crew insurance, lender insurance, fixed base operator insurance, flight training insurance, general aviation pleasure and business insurance, hanger-keepers’ liability, rotorcraft insurance, space or satellite insurance, and unmanned aircraft systems insurance. While general aviation risks and ground-based operations involve some of the same considerations as insurance coverage in other industries, the insurance provided to airliners is a distinctly unique market. In traditional markets, premiums are collected from large volumes of insured’s, providing capital to pay for a few losses and earning the insurer a reasonable profit over time. However, “the aviation insurance market has always differed from most other insurance markets in that both the premium base and the customer base are very narrow, with just a small number of insured’s.” The International Air Transport Association (IATA) has about 230 members, a very small number of potential insured, each with potentially huge exposures. A single insurer will not usually underwrite the entire amount of an airline’s overall risk. Instead, “a number of insurers will each underwrite a small percentage of that exposure, thus keeping the exposure for any one insurer within acceptable limits.” A recent case discussed such a pool of aviation insurers and the right of the managing agent of the pool to pursue the rights of the entire group.

1.2 STATEMENT OF THE PROBLEM

The insurance industry is primarily a risk undertaking business the function of the insurance industry is essentially the same in the whole world. Which has not been effectively and efficiently achieve. Although the author has choose the topic of the effect of aviation insurance and economic growth in Nigeria. The problem and questions that militate against the normal function of the insurance industry needs to be highlighted. In an attempt to identifying the problems that have hindered the achievement of these functions, the need to provide solution to the problem cannot be over emphasize. One of the problems is economic instability which has eaten deep into the fabric of the nations and has been hindering the smooth operation of the insurance industry. Two, the political environment has adverse effect on the economic environment as various administration have come up with their various operational and investment policy in Nigeria and these has first of Insurance companies to reduce their staff strength and these has attending effect.

1.3 OBJECTIVE OF THE STUDY

The main objective of this study is to examine the effect of aviation insurance and economic growth in Nigeria; but to aid the completion of the study, the researcher intend to achieve the following specific objective;

1. i) To examine the effect of aviation insurance on Nigeria economic growth
2. ii) To ascertain if there is any significant relationship between aviation insurance and economic growth

iii) To examine the role of aviation insurance on the development of Nigeria aviation sector

1. iv) To examine the impact of aviation insurance on the productivity of insurance sector in Nigeria.

1.4 RESEARCH QUESTIONS

The following research questions were formulated by the researcher to aid the completion of the study;

1. i) Does aviation insurance has any effect on Nigeria economic growth?
2. ii) Is there any significant relationship between aviation insurance and economic growth?

iii) Does aviation insurance play any role in the development of Nigeria aviation sector?

1. iv) Does aviation insurance have any impact on the productivity of insurance sector in Nigeria?

1.5 RESEARCH HYPOTHESES

The following research hypotheses were formulated by the researcher to aid the completion of the study;

H₀: there is no significant relationship between aviation insurance and economic growth

H₁: there is a significant relationship between aviation insurance and economic growth

1.6 SIGNIFICANCE OF THE STUDY

The very concept of insurance has often been misunderstood and misrepresented in the society, not because of myopic disposition of the general popular but for the fact that insurance awareness has not been fully implemented into the system of which this research work intended to promote insurance awareness, with the view of identifying areas of immense benefit from the corporation to the insurance community as well as to insurance practitioners and the overall contribution to the development of the Nigeria economy. In the highlight of the above the researcher tends to investigate into the effect of aviation insurance on the development of the Nigeria economy- it is hope that the finding and recommendation. From this study shall be careful to the following. The government as the determinate of the economic policies in Nigerian. The accountants, auditors and professional manager who are expected to use insurance in form of national decision making. The society who are wholly and practically involved in the use of insurance activities. Other investors who may want to invest in the insurance industry.

1.7 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the effect of aviation insurance and the economic growth in Nigeria, but in the course of the study there were factors that limit the scope of the study;

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

 Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study.

1.8 OPERATIONAL DEFINITION OF TERMS

Aviation

Aviation, or air transport, refers to the activities surrounding mechanical flight and the aircraft industry. Aircraft includes fixed-wing and rotary-wing types, morphable wings, wing-less lifting bodies, as well as lighter-than-air craft such as balloons and airships.

Insurance

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.

Economic growth

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

Insurance policy

In insurance, the insurance policy is a contract between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay.

1.9 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

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