Rameshwor Thapa
President
Airlines Operators Association of Nepal (AOAN)

What is the size of the aviation insurance market in Nepal?

When talking about the insurance size, the Nepali aviation insurance business is small in global comparison. However, it has an addressable size in the context of the South Asian countries. That means the aviation insurance market in Nepal is neither big nor small but of medium size in terms of money as well as the number of insurers involved in this business. We now pay USD 8 to 9 million in premium to international companies annually.

Why is the aviation insurance premium so high in Nepal? How can we lower it?

The re-occurrence of air crashes have contributed to the increment of aviation insurance premium. The open sky aviation policy has helped the mushrooming of airliners in Nepal while the infrastructure remains almost the same. And there may be many issues concerning safety issues. The dramatic increase in premium is also because of the climate and weather. Importantly, trunk route operators have fewer problems in comparison to the STOL (short takeoff and landing) route operators mainly because of the high hills and high altitude. In STOL, mainly in helicopters, there are many instances of accidents beyond what could be conconsidered as normal. 

Now there are more airports and other facilities which could be rated higher in safety. We are organizing many safety seminars and programmes to lower the premiums with the safety much assured. There have been programmes enhancing the safety measures and we are very much confident that we would be able to enhance safety measures. We are more aware about the safety concerns today than in the past. The audit reports by ICAO and other organizations have diversified it further and made it clear also. Aircraft and passenger safety should be the airliners’ main concern. If we maintain all this - for enhanced safety in the aviation sector - definitely the premium will come down.

There have been more than 50 major accidents in the past 10 years. Why is the frequency of aerial accidents so high in Nepal?

It is very sad and bitter fact. The increasing premium in aviation insurance is making it difficult for the airline companies. These days we are trying to improve the security in the aviation sector and are not expecting such accidents again. We are working to reduce such accidents by organizing different seminars and programmes to enhance safety in the aviation sector. Through these safety seminars, we are being able to make the stakeholders aware about air safety. There, we make the pilots aware about focusing on safety while the stakeholders update themselves with different issues and activities in the aviation sector. All the people involved in this sector should understand that not compromising any safety measures but maintaining them will help mitigate the risks. Visual Flight Regulation (VFR) should not be allowed to go through the clouds.  If we follow all these safety measures, definitely the risks have to go down. Civil Aviation Authority of Nepal (CAAN) should monitor these flights and instruct accordingly.

The annual claims payout in the aviation insurance has been constantly rising. This is bound to further increase the already significantly high aviation insurance premium. How are we going to tackle this problem?

We are concerned about this problem. Basically, if we are able to enhance safety measures, it would help to lower the premium paid out to reinsurance companies. Most of the re-insurers are quite convinced that we would be able to maintain safety properly. End of the Maoist war has also spread positive message to the reinsurers. In the past, we had to pay US$ 60 million premium in third party liability though we owned small aircraft. After knowing the problem, Nepal government addressed this. And now we have to pay some 10 million dollars for the same. The thing is, once we fix the safety problem, the premium will come down.

There are various types of aviation insurance policies in the world. Are all of them available in Nepal?

There are not various types of insurance policies in the aviation insurance. The available insurances are air-craft’s insurance, passenger’s insurance, cargo insurance, crew-members insurance- including others. There are insurance policies with same periphery and nature and are normally practiced in other countries as well. Now there are different types of reinsurance market but the problem is they take our situation as an alarming one. I think the situation is not that alarming. Some of the reinsurance companies really want to work and support the Nepali aviation sector which includes Indian as well as western reinsurance companies. A new aviation group in Malaysia is also interested in this business. Moreover the re-insurer companies are not of various types; they are of a singular nature and type.

The country’s first-ever aviation insurance summit was organized in the capital recently. What’s your impression of the summit?

It was definitely helpful to us. I think the reinsurance companies that were finding threats in our sky are convinced that the premium which we are paying is not justifiable. We hope that in the coming days they won’t increase the premiums and won’t take our sky as an alarming one for aviation insurance. They got a chance to understand our aviation environment and we had a chance to put the reality in front of them. We were able to prove that there is neither any violence in the country nor any threat in the aviation sector. We were able to prove that we are quite committed to maintaining safety and that we are continuously working on it. We have learnt from past accidents and we are committed to avoiding such accidents.