The nation’s insurance industry is beginning to lose the benefits of the country’s local content policy on the domestication of business, as many big-ticket risks are finding their way offshore through reinsurance.
The Federal Government Nigeria Content Development Act 2010 allows for the domestication of risks emanating from the country until local capacity is fully exhausted.
Unfortunately, retention capacity is low, particularly in oil and gas and aviation sectors where over 70 percent of the business are taken to the overseas market through reinsurance, with only a small proportion in most cases placed locally.
Sunday Thomas, a commissioner for insurance/CEO, National Insurance Commission (NAICOM), confirmed the development on Tuesday 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 opening remarks, Tuesday, 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.
More businesses, especially in the oil and gas and the aviation sectors are now being re-insured abroad, he said.
“Of more concern is the declining participation of life companies in the annuity business, which is the emerging business for our industry. These are the areas where the industry can impose itself on the economy through the control of funds for national development,” he said.
He also said the industry must invest handsomely in technology as one of the key drivers for developing the market, saying, “The Institutions should be prepared to digitalise their processes, procedures, and systems in order to make their operations seamless and real-time.”
The Commission is investing heavily in automating its processes and expects nothing less from the insurance institutions, he said, noting, “An industry Information Technology Guideline has been issued for the operators and the Commission requires your support and cooperation for effective compliance.
“The need to invest massively in awareness campaigns about insurance cannot be overemphasised as there seems to be a consensus that public perception of insurance still remains very low largely due to lack of awareness by the public.”
According to Thomas, another lingering issue that has continued to hurt the insurance business in the country is the total lack of understanding of the business and the benefits.
The strategy must change, insurance institutions must make themselves visible in all geo-political zones in the country and must take the marketing of insurance products to a higher level than the present, according to him.
“The recent crises associated with #EndSARS protest, which led to the destruction of lives and properties, are indeed an eye-opener and an opportunity for companies,” he said.
The NAICOM is profiling companies with huge unsettled claims for necessary regulatory action, and companies that are responsive to the plight of their clients in prompt settlement of claims are encouraged to sustain the good business conduct, he said.
The Nigerian insurance industry at the end of 2019 generated a total premium income of N490 billion, a growth of 15.5 percent from N413.8 billion in 2018, with oil and gas business, motor leading in volume.
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