While stakeholders in the Nigerian insurance industry are celebrating the increase in gross income by 24 per cent to N319 billion ($1.60 billion) from N258 billion in 2013, THISDAY findings have revealed that the annual premium flight in the industry has now reached N148.5 billion ($750 million).
THISDAY checks also revealed that the $750 million premium flight was concentrated in the oil and gas, and aviation sectors.
Recently, Africa Re, founded by members of the then Organisation of African Unity in 1976, maintained that despite its best efforts more than 80 per cent of the reinsurance risks in Africa are covered outside the continent. Experts, however expressed the belief that the industry could in the future capture a larger share of the risk that is placed offshore if the on-going consolidation in the industry succeeds.
The immediate past Commissioner for Insurance, Mr. Fola Daniel, had last month revealed that just three million Nigerians have insurance policies in a population of 175 million.
Gross premium income in the industry amounted to N258 billion in 2013 according to the National Insurance Commission (NAICOM), and increased by 24 per cent to N319bn ($1.60bn) last year.
NAICOM numbers showed that the industry employed about 50,000 people. Analysts told THISDAY that the figures underpinned the view that insurance in Nigeria, along with several service sector industries such as advertising and marketing, is far from realising its potential.
“To make the point differently, 20 million Nigerians have bank accounts yet just three million have insurance policies, “analysts at FBN Capital.
The analysts stated that one route to expansion lies in selling insurance policies to groups adding that, “Recent examples include deals with the barristers’ association, a group of traders of car parts and a union of market women.”
They added: “Another route is to tap the informal sector. This has not been adopted by all operators because of the necessary investment in rural branches. However, its advocates are adamant that the sector’s claims record compares favourably with that of their large corporate clients.
“These are 36 listed insurance companies on the NSE according to the regulator. Few equity investors are chasing the shares because the individual companies are generally too small and turnover is low. The mandatory recapitalisation of 2007 halved the number of underwriters to less than 60 but, unlike the earlier exercise in the banking industry, did not create large investible companies on the exchange.”
Investors, they warned, are likely to remain on the side-lines without a second round of consolidation in the industry.
“Some international household names have bought into the industry: these include France’s Axa (Mansard Insurance), Old Mutual (Oceanic Insurance) and Sanlam (FBN Life Insurance). They bring new skills to the industry but do not always favour public listings, “said FBN Capital.