Resilience, rising capacity drives insurance retention

Growing market resilience and the rising capacity of insurance companies in Nigeria are boosting the retention of risks within the domestic space.

Despite operational challenges posed in domestic and global economies, the industry continues to post inspiring numbers in business retention, reflective of the market resilience and increasing capacity, the National Insurance Commission (NAICOM) has said.

According to figures released by NAICOM in the fourth quarter 2022, the average retention ratio stood at 71.3 percent, although slightly a point lower than it held in the previous quarter and four points lower in comparison to the same period year on year.

The Commission noted that the life business retained 93.3 percent from its prior position of 93.8 percent in quarter three.

“In the non-life segment, which also took a similar pattern, motor insurance continued its lead as the highest retaining portfolio with a retention ratio of 93.5 percent, also a point higher than its standing in the prior quarter, the data shows.

Oil & Gas recorded the least at about 35.9 percent. The oil and Gas portfolio, NAICOM noted lamentably remained a challenging angle in the market owing to its nature of enormous capital and professional requirements.

Consequently, the retention performance in the current period sustained its prior position when compared to the third quarter as evidenced by the overall non-life business ratio of 55.0 percent, slipping from about 56.6 percent held in the prior period.

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In terms of claims, the industry N318.2 billion reported claims, representing a 31.2 percent quarter on quarter growth, while N244.3 billion was actually paid out to customers, and NAICOM has attributed this to possible attainment because of growing awareness and market expansion as well as consumer’s confidence.

In terms of business class, non-life business compared to prior periods continued its dominance, contributing 57.4 percent relative to the share of the life business 42.6 percent, keeping about same position in prior period.

The proportional significance of life in the industry sustained a positive course in recent times reflective of the consumer’s confidence and awareness.

In-depth analysis of the non-life segment of market shows Oil & Gas business sustained its market share dominance at 30.25 percent, increasing by 2.4 percent compared to the previous quarter, while Fire Insurance came a distant second, contributing 22.2 percent, and maintaining same pattern of contribution to the gross premium pool of the market.

“Motor Insurance contributed 14.9 percent; Marine & Aviation 12.2 percent, General Accident 11.1 percent and miscellaneous 9.5 percent followed in that order.

“On the other hand, individual life portfolio at 38.6 percent even as its relative contribution fell by about 2.6 percent compared drove life business to third quarter 41.6 percent. In a contrasting path to the previous quarter, group life followed by 34.5 percent per cent while annuity business contributed gross premium income of 26.9 per cent during the period.”

NAICOM revealed that the industry recorded a remarkable gross premium of N726.2 billion, representing a growth of 36.3 percent quarter on quarter and 17.8 percent year on year.

This is a remarkable situation compared to the real growth (3.5 percent) of Gross Domestic Product (GDP) over the same period and is attributable to consistent regulatory measures being carried out by the Commission, NAICOM said.

In terms of market size, total assets of the industry stood at N2. 328 trillion in the fourth quarter, sustaining a positive growth that signifies expansion at the rate of 2.4 percent, quarter on quarter and at 4.4 per cent year on year.