• Thursday, July 25, 2024
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Nigeria’s insurers to save dollars on new reinsurer’s entry

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The coming of FBS Reinsurance Limited into Nigeria’s insurance industry is expected to boost local capacity, increase retention and help underwriting companies save dollars that were hitherto paid offshore.

Reinsurance is a coverage that an insurance company purchases to insulate itself from the risk of a major claims event.

The National Insurance Commission (NAICOM) late 2020 licensed five insurance firms including FBS Reinsurance, whose coming increased to three the number of reinsurance companies in Nigeria.

Other Nigerian registered reinsurers are Nigerian Reinsurance Corporation and Continental Reinsurance plc, servicing about 60 local underwriting firms and other insurers outside Nigeria.

Fola Daniel, managing director/CEO, FBS Reinsurance Limited, in a telephone response to BusinessDay questions, said, “FBS is already taking businesses from both the local and international market.”

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Daniel, who was a former commissioner for Insurance, said the country’s reinsurance capacity was thin, “and that is why there is huge recourse to foreign capacity.”

According to Daniel, Local Content Development Act 2010 provided opportunity for local insurers to take up risks emanating from the domestic economy to 70 percent before it is ceded to offshore market.

The provision of this law is underutilised, particularly in oil and gas business, where most of the businesses are reinsured outside the country, he said.

According to industry statistics, only about 35 percent of the businesses in oil and gas sector are retained locally, while the rest are taken offshore.

Local Content Act 2010, in making this provision, anticipates that taking advantage of this by insurers would contribute to more economic growth, create employment and manpower envelopment.

Sunday Thomas, commissioner for insurance/CEO of NAICOM who corroborated Daniel, had noted that the gains of domestication policy of the government as enshrined in the Nigeria Content Development Act 2010 was gradually losing its meaning for the insurance sector.

Thomas in his opening remarks during the 2020 Insurance Directors Conference held in Lagos with the theme: ‘Insurance Industry Post Pandemic: The Pursuit for Survival and Growth,’ said operators in the industry must strengthen their human and financial capital for effective participation in big ticket risks.

He said more businesses, especially in the oil and gas and the aviation sectors, were now being re-insured abroad.

Daniel however stated that FBS was not coming to close the whole gap, but bridge some of the gaps, increase retention, and also enhance export of capacity to other markets.

“We have started in full. We have been in the industry since November, and we are part of the New Year renewal,” he said.

Reinsurers are required to pay the new N20 billion capitalisation stipulated by the National Insurance Commission (NAICOM), the sector regulator, under the industry’s new capital requirement that has been on until recently when it was halted by a court order.

The Nigerian insurance industry at the end of 2019 generated total premium income of N490 billion, a growth 15.5 percent from N413.8 billion in 2018, with oil and gas business, motor leading in volume.

FBS is bringing together professionals with proven experience from the brokerage and underwriting units of the industry, like Bala Zakariyau, the former managing director of Niger Insurance who currently plays in a support unit of the Nigerian aviation industry; Ahmed Olaniyi Salawu of the Standard Insurance Consultants, and Wole Oshin Bankole of the Custodian Investment plc that has just taken a plunge into the property sector by taking a large chunk of the United Property Development Company, a subsidiary of the UACN plc.

Others are Ebele Ofunneamaka Okeke, from Nnewi North, Anambra State who rose to the position of the head of Nigerian Civil Service before her retirement, and also Yusuf Hamisu Abubakar, a lawyer, and an accomplished administrator and businessman with vast experience at the senior executive level in power and communication sectors.