The total amount of insured losses recorded by 14 largest insurance firms in Africa’s most populous nation has hit N85.14 billion in 2017, up 23.15 percent from December 2016, according to data compiled by BusinessDay.
Claims expenses have been rising in the last two years as policies are increasingly fallen due, while a devaluation of the currency ballooned reserves that are in local currencies.
According to the 2017 audited financial statement of these firms, average claims ratio or otherwise known as loss ratio increased 43.14 percent in December 2017 from 40.35 percent the previous year.
This means for every N100 of premium earned in a given accounting period, N0.43 is paid back in the form of benefits (claims).
The loss ratio is the ratio of losses to gains such as the ratio of paid insurance claims, including adjustment expenses, to premiums earned.
“A lot of policies are maturing and insurers are mandated to honour such obligations,” said an actuarial scientist in one of the big insurance firms who doesn’t want his name mentioned.
Some analysts attribute rising claims to flooding in some parts of Lagos and increased incidence of fire.
Peter Irene, interim Managing Director/Chief Executive Officer, of International Energy Insurance Company Plc, said that there are claims that were in dollars in the reserves before the devaluation and when converted after the Naira weakened, claims spiked.
“When there is a recession, people who don’t have claims will be looking for how to make money out of it,” said Irene.
Drilling down the financial statement of these firms show AIICO Insurance’s claims expenses increased by 59.12 percent to N20.77 billion in the period under review from N13.06 billion the previous year.
FBN Insurance Limited’s claims expenses grew by 84.16 percent to N4.30 billion in December 2017 from N2.33 billion the previous year.
Lasco Insurance’s claims expenses surged by 215 percent to N1.96 billion in December 2017 from N622.70 million in December 2016.
AXA Mansard Insurance’s claims expenses increased by 40.25 percent to N9.53 billion in the period under review as against N6.81 billion the previous year.
Experts are upbeat that the industry will benefit from the gradual economic recovery as more firms are expected to take up insurance.
The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017.
An increase in crude prices and the introduction of a new foreign-exchange system that ended a crippling shortage of dollars helped attract more investment flows into the country, while improving liquidity for business.
While high claims signals improved customer service, the industry’s contribution to the economy is abysmally poor.
Nigeria’s insurance industry contributed less than one percent to a $430 billion economy.
Insurers’ FY 17 Claims expenses
|2017 (N’m)||2016 (N’m)||%Change|
|FBN Insurance Plc||4,307||2,336||0.84|
|Law Union & Rock||737||839||– 0.12|
|Equity Assurance||770||1,895||– 0.59|
|Continental Re||10,652||10,931||– 0.03|
|Sovereign Trust||1,303||1,440||– 0.10|
Insurers HY’17 Claims ratio
|2017 (%)||2016 (%)|
|FBN Insurance Plc||0.22||0.21|
|Law Union & Rock||0.28||0.32|
Companies Financials; BusinessDay Analysis