The insurance market in Nigeria is being confronted by a difficult operating environment as fluctuating oil prices threaten the country’s economic expansion, A.M. Best has declared.
A.M. Best stated this in its new Special Report, titled “Nigeria’s Insurance Sector Faces Economic Challenges, but New Government Improves Prospects.”
Deniese Imoukhuede, associate director, analytics, said: “Domestic insurers, particularly those that maintain insurance portfolios weighted to the oil and gas segment, are likely to feel pressure from the decline in oil prices. This reflects delays, or in some cases, cancellations of infrastructure projects as a result of negative investor sentiment relating to the stability of the economy, and therefore, lower premium revenues.”
In spite of such challenges, there appears to be some signs of renewed confidence in the economy following the accession of the new government led by Muhammadu Buhari.
It is anticipated that Buhari will bring much needed changes by reducing corruption, implementing economic reforms by reducing the country’s reliance on oil and by increasing foreign investor interest in Nigeria through the promise of greater transparency. Should these expectations transpire, greater confidence in Nigeria will likely attract further interests into its largely untapped insurance market.
A.M. Best’s research states Nigeria’s insurance regulator, the National Insurance Commission (NAICOM), has over the years implemented numerous reforms to improve the perception of the sector and expand the contribution of the industry to the country’s economic output, although to varying degrees of success.
The report also examines how the “Pension Reform Act 2014” is likely to support further growth of the life segment and the reasons why foreign investors are attracted to Nigeria.