Fitch Ratings has stated in a new report that the Nigerian insurance industry will continue to expand, despite recent economic headwinds and significant structural challenges.
Fitch noted that the industry has experienced declining growth rates in recent years, albeit from a high base.
However, it pointed out that a number of leading insurers have maintained strong premium and balance sheet growth over the past three years. Favourable factors supporting the long term development of the industry include robust demographic fundamentals, investor interest and low insurance penetration.
“Fitch expects recent naira weakness to present an opportunity for foreign investors by providing an affordable entry point, while the difficult operating environment may incentivise small under-capitalisedinsurers to consider a sale,” it stated.
An American market research organisation, Fast Market Research, had predicted that the Nigerian insurance industry would grow at an average rate of 7.5 per cent per annum between 2014 and 2018.
This was part of the conclusions of the new insurance research report from Timetric entitled, “The Insurance Industry in Nigeria: Key Trends and Opportunities to 2018”, by the research organisation. According to the report, the cumulative average grow rate (CAGR) for the country’s insurance industry peaked at 10 per cent as a result of the superlative performance of its life insurance segment.
This life arm of the industry was said to have recorded a 22.20 per cent increase in its premium income for last year.
“In terms of written premium value, the Nigerian insurance industry grew at a review period CAGR of 10 per cent. This was due to the strong performance of the life segment, which registered a CAGR of 22.20 per cent during the review period.
“The industry is projected to grow at a CAGR of 7.50 per cent over the forecast period. The strength in the country’s economy, combined with the introduction of new laws by the Nigerian insurance regulator, is expected to contribute to the overall growth of the Nigerian insurance industry over the forecast period,” the market research organisation had predicted.
The American based research organisation also said the growth in Nigeria’s insurance industry, during the review period was as a result of the increase in individuals’ disposable income, a decrease in inflation rate and a gradual increase in its labour force.
The Nigerian insurance regulator was said to have introduced the International Financial Reporting Standards (IFRS) this year, which was geared more towards harmonising the entire insurance industry.