A recent price review by reinsurance companies in the international market to reduce loss position on marine and aviation risks has started helping Nigerian insurers make profit in that line of business.
According to underwriters in the Nigerian market, marine and aviation risks are beginning to turn profitable, as pricing of the risks now better reflects the market position.
Reinsurance companies in the international market particularly London had insisted on rate increase after continuous losses from aviation and marine risks, forcing underwriters globally to demand an increase in premium from their customers.
A Nigeria CEO who does not want his name mentioned, said ‘We are beginning to see improvement in marine and aviation since the price review by the reinsurers.
“We are doing it now at a better rate, which places us at a position to return some profit”.
The CEO also hopes that such review will happen in fire and burglary risks because that segment of the business has been very volatile, and exposed the market to huge claims uncontrollably, the CEO told Business day.
Aviation reinsurance rates rose by up to 250 percent at January 1 renewal date, broker Willis Re said in a report published by Reuters.
According to the report, with the market still reeling from the impact of the Boeing 737 MAX that crashed two years ago, the aviation market was at huge losses.
Insurers and reinsurers face claims from the crashes relating to hull and product liability that could amount to more than $2 billion, a large sum in a relatively small insurance sector, Willis Re International chair James Vickers told Reuters.
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Aviation underwriters are also suffering from lower premiums due to worldwide lockdowns and travel bans, as insurance contracts are often negotiated based on the amount of time planes spend in the air, according to him.
Reinsurers, who share the burden of large risks with insurers in return for part of the premium, are also seeing rates rising in other sectors after years of falls.
Analysts at Jefferies see a reinsurance hard market – in which premium rates are rising and “underway”, highlighting gains in U.S. property, global casualty and specialty lines such as trade credit and political risk, as well as aviation.
“Reinsurers were feeling quite bullish and feeling, ‘this is our moment’,” Vickers said, adding that they had nevertheless “achieved at least rate stability and some rate increases”.
Vickers said the biggest disagreements between insurers and reinsurers had been about cover for cyber-attacks and communicable diseases such as COVID-19. Reinsurers are largely excluding these risks from policy wordings, he said.
Professional Reinsurers Association of Nigeria (PRAN) late last year announced plans to increase premium on major classes of risks following rising cost of reinsurance, foreign exchange and inflation.
With the dollar rate now at rooftops and replacement cost almost unbearable, local insurers were beginning to see resistance from reinsurers who are asking for upward review of premium, according to industry sources.
They say fire insurance is most affected having recorded an unprecedented rise in claims over a period, particularly from the manufacturing sector.
Though the Nigerian Council of Registered Insurance Brokers (NCRIB) had earlier kicked against the proposal, the matter is still on the table of the National Insurance Commission (NAICOM) as discussions are still ongoing.
Rotimi Edu, president of NCRIB reacting to the development, said we are engaging with NAICOM and others arms of the industry on this, that is only what I wish to say on this, he said.
Edwin Igbiti, former managing director/CEO, Niger Insurance, said it may not be out of place to ask for a review on the premium paid on certain classes of risks, particularly fire insurance, because claims on that line of business have been very huge for some time.
According to Igbiti, reinsurers bear a larger proportion of claims on that class of risk most times, and so have seen an increased loss ratio that may require review of price to recoup.
