Nigeria’s largest insurers have managed to grow revenues even as insurance penetration remains low.
Sixteen insurance companies that have released 2018 audited financial statement saw combined gross premium written increase by 15.79 percent to N345.16 billion, from N298.0 billion as at December 2017.
A breakdown of the figure shows life insurance spiked by 32.07 percent to N139.48 billion as at December 2018, from N105.60 billion a year ago, while non-life insurance was up 48.41 percent to N161.24 billion from N139.48 billion a year ago.
The boost from life segment is propelled by regulator intervention in the sector, according to Owolabi Salami, executive director, Allianze Insurance plc.
“NAICOM had in January 2018 mandated life insurers to comply with the Group life rate at 6 percent per mill, which was 300 percent higher than market rate. This means for every N1,000 of the sum insured the person will be charged N6,” said Owolabi.
“Also, infrastructure spends by the federal government created a lot of business opportunities for operators in the industry. For instance, the Second Niger Bridge and railway projects paved the way for premium income. We experienced an uptick in income from retail business with regards to motor vehicle,” he said.
Most companies were struggling to survive before the new guideline because the rates they charged were not commensurate with the liabilities therein.
A breakdown of non-life insurance figures shows these firms raked in N114.40 billion from fire business, representing 66.06 percent increase from N8.67 billion recorded the previous year.
Motor segment surged by 154.96 percent to N15.40 billion from N6.04 billion recorded the previous year.
Combined oil and gas business surged by 604.89 percent to N17.30 billion in the period under review as against N2.86 billion the previous year.
Despite the improvement in revenue, Nigeria’s insurance sector is still one of the most underdeveloped compared to peers in most African countries.
Nigeria, with a population of 180 million people, has a penetration rate of about 0.3 percent.
That compares with South Africa (14.7 percent), Kenya (2.8 percent), Angola (0.8 percent) and Egypt (0.6 percent).
Similarly, the sector’s insurance density (a measure of industry gross premium per capita) is still one of the lowest when compared to peers – South Africa ($762.5), Egypt ($22.8), Kenya ($40.5) Angola ($30.5) and Nigeria ($6.2).
Because firms do not have the financial strength (compared to banks) to invest in fixed income securities like treasury bills or debt instrument or real estate to underpin revenue, they have continued to record slim margins.
Unlike their peers in the banking industry that have been taking advantage of Central bank’s monetary policy to deliver a higher returns to shareholders, insurers’ investment returns have been weak.
In Europe, United States, and Asia, insurers are so liquid that they own banks; they also own skyscraper buildings they earn rent from.
Moronfola Monsuru, actuarial analyst at Wapic Insurance plc, said that insurers should do more of retail business because it is more profitable and reduces risk.
“You tend to retain more when you do retail because you cede less,” Monsuru said.
The regulator has announced the recapitalisation of the insurance and reinsurance companies so that they can take on more risk and become competitive on a global arena.
The minimum capital base for reinsurance companies has been increased from N10 billion (USD $27.7 million) to N20 billion ($55.5 million), and from N3 billion ($8.3 million) to N10 billion ($27.7 million) for general insurance.
Additionally, the minimum capital base for life insurance companies has been raised from N2 billion ($5.5 million) to N8 billion ($22.2 million), and for composite insurance from N5 billion ($13.9 million) to N18 billion ($49.9 million).
“The recapitalisation directive affects all insurance and reinsurance companies other than takaful operators and micro insurance companies,” said Salami Rasaaq, head of the Commissioners Directorate for NAICOM.
“The new minimum paid-up share capital requirement shall take effect from the commencement date of the circular for new applications which is May 20, 2019,” said Rasaaq.
BALA AUGIE
