As investors across the world seek new investments in emerging economies particularly frontier markets like Nigeria, government and other stakeholders should expand priority attention on security to include insurance.
This therefore raises concern on how nations that want to take advantage of this drove following slow down in European market are giving priority to security of life and properties.
Analysts looking at the potentials in Nigeria market advise that while government continues to improve on her efforts to clamp down insurgents of the Boko Haram and other terrorism activities, there is need to strengthen insurance protection as obtainable in other advanced markets.
Wole Adetimehin, president, Chartered Insurance Institute of Nigeria (CIIN) said though there are various talks between local insurers and their foreign counterparts on how to develop products for special risks like terrorism, kidnapping and floods, there is need for intervention fund.
The fund, he noted, would provide guarantee to local insurance operators that will be willing to take up this risk, which he said could wipe a whole market. “The claim incidence is huge that is why an intervention fund would need to be structured for the local market.
“This is why Nigeria being one of the frontier markets for investment must take insurance very seriously by ensuring that there are polices and products to carter for terrorism, kidnapping and ransom, while efforts to improve the security situation continues.
“We expect that our efforts to support the local market develop capacity to ensure terrorism risk, kidnapping and ransom begin to yield result, Femi Oyetunji, managing director, Continental Reinsurance plc said.
Oyetunji said that though the reinsurer through a partnership with a UK firm had packaged a programme for local insurance operators, that area of insurance was yet to pick up as expected.
Meanwhile, investors making enquiries on the Nigerian market are worried about the activities of Boko Harm in the northern parts of the country, which analysts have noted is a huge impediment to the flow of foreign direct investment.
According to statistics by the Central Bank of Nigeria (CBN) Foreign Direct Investment (FDI) inflows dropped by 19.24 percent from $2.13 billion in the fourth quarter (Q4), 2011 to $1.72 billion in Q1, 2012.
The decline in FDI inflows during the review period the apex bank noted were caused by growing level of insecurity occasioned by terrorist activities.
According to analysts’ political risk insurance against conflict or breach of contract has become a key factor for investors seeking higher returns in developing markets in Africa, Asia and the Middle East.
They stated that the euro zone economic crisis and low returns in other advanced economies are forcing investors to look for more lucrative places to park their money.
Michel Wormser, chief operating officer of the World Bank’s Multilateral Investment Guarantee Agency (MIGA) was quoted to have said that “We are meeting investors that are finding their own markets quite constrained and are looking for new places to maintain their business activity at a higher level.”
Political changes in the Middle East, fewer long-running conflicts in Africa and less tolerance for leaders who cling to power, have also added to the interest, Wormser stated.
MIGA’s mission is to promote foreign direct investment into developing countries by offering political risk guarantees to the private sector.
According to him, demand for guarantees has been especially strong for large infrastructure development projects in countries such as Ivory Coast, Senegal, Kenya, Rwanda, Ghana and Pakistan, he added.
“We are seeing Africa as a major growth area for investment. Investors going to Africa today are different from the ones that used to go there, more sensitive to risks, and these new investors are much more demanding of the sort of products we are offering,” Wormser said.