Why Nigerian insurers will see minimal Covid-19 claims compared to total global loss
Nigerian insurers’ insignificant share of non-material damage risk exposures will save it from heavy claims expected to hit the global underwriting industry following Covid-19 pandemic.
The global economy is facing huge claim losses due largely to business interruptions (non-material damage risks) caused by lockdowns instituted by various governments to contain spread of the pandemic.
This incidentally is not a common risk in the Nigerian market, as the policy is still novel with shortage of expertise.
Material damage, which is a common product in Nigeria, covers business owners against loss or damage to physical assets including buildings, contents, plant and equipment, equipment, fitout and stock.
Analysts at Switzerland-based UBS Group AG, according to an Artemis report, expect that Covid-19 pandemic-related claims will range from $30 billion to $60 billion globally. This is as a Non-U.S. business interruption claims are expected to lie between $7 billion and $22 billion.
Statista, a leading provider of market and consumer data also reports that the global insurance industry is expected to lose $203 billion due to the Covid-19 pandemic.
According to Statista, underwriting losses are projected to reach $107 billion alone, with the remainder coming from the hit their investment portfolios have taken in the wake of the outbreak.
Khalid Momodu, deputy general manager and head of Business Development at YOA Insurance Brokers Limited speaking at the investiture of Reginald Egbuniwe, as the 12th President, Institute of Loss Adjusters of Nigeria held virtually weekend said Nigeria is going to witness less Covid-19 claims because it’s more into material damage exposures.
He said this is because the market is unlike its counterparts in advanced markets that have a lot of claims coming from business interruptions, litigations and other environmental exposures.
Momodu said ‘Yes, Nigeria as an emerging market will not suffer much loss now, but we should begin to prepare for these exposures including climate change risks, cyber security risks among others.
Environmental concerns will likely impact businesses in the future and insurers have to be there to support businesses, he said.
“There was a kind of tremor in part of Abuja in March; there was similar thing in Accra recently, as well as in Kenya, and a new rainfall pattern is ongoing. All of these show that we may begin to have climate risks in not too distant future,” Momodu stated.
Mayowa Adeduro, managing director/CEO, Law Union and Rock Insurance Plc explained that Covid – 19 pandemic is novel. It is an unusual occurrence that affected all countries of the world, and there was no previous statistics or estimation of possible disruption and loss of economic values.
Adeduro stated clearly that there is no Covid-19 insurance in Nigeria.
“However, it is possible for a company to offer ex-gratis payment to a client who suffered Covid-19 losses out of commercial relationship not on the basis of insurance contract provided. And I should think that can come if only one or two clients are involved,” he stated.