Effect of the New Forex regime on Insurance Industry in Nigeria

The Deputy President, Chartered Insurance Institute of Nigeria (CIIN), Mrs. Funmi Babington-Ashaye, has said that the new forex regime will impact positively on the operations of insurance companies, particularly in the payment of reinsurance premium to foreign reinsurers.

Speaking at a press briefing of the Institute in Laos said if you take for instance aviation, oil and gas, it has been very difficult to get forex to pay for reinsurance fees until the new forex regime, I thinkit will be better for the economy and the insurance industry.

She said “It is very clear that inflation is very high and the country is actually on the brink of recession. Clearly, it’s only when you have a lot of money to spend that you remember insurance, even for corporate organisations, they have a lot of issues regarding their bottom line. Prices have gone up and you see some of them that are even insuring in the past comprehensively, but have started insuring third party, even individual not renewing at all. You can imagine the negative impact on the bottom line of insurance firms.
“Also talking about aviation and oil and gas, we are aware of how it’s been difficult, until couple of days, to get forex, in payment of insurance premium to overseas reinsurers. A lot of companies have not been able to cede reinsurance premium to overseas reinsurers. When you talk of large risk, that is, oil and gas, aviation, very small proportion are being kept in this market and close to about 80 per cent to 90 per cent are being ceded abroad and if there is no foreign exchange in the country for them to cede, you can imagine what they are sitting on – they are actually sitting on a keg of gun powder that can explode anytime. Thanks for flexible exchange rate that just started recently.”
According to her, “I believe that forex will be available at anytime to any company, to any company and individuals at a rate that is determined by demand and supply. I think that should be able to resolve that, because a lot of premiums are in the country, such as airlines that couldn’t take out their income to their foreign countries. In addition, claims are also mounting wide. Inflation, by the time you adjust it and you know by the time you want to pay claims, you have to pay it based on the adjusted figure and the prices have gone up and apart from that, a lot of big claims are coming in. But I am very confident that once economy improves, of course, it will also dovetail to all sectors of the economy, inclusive of insurance industry”.
According to her, there is going to be forex, it’s going to be accessible, foreign investors have seen the policy direction in the country now and most of them will come into the country, once they come back into the country, there would be a lot of forex and people would be able to do their businesses as it used to be in the past.
The Director General of the Institute, Olutayo Borokini, in his response said, if the foreign exchange is well managed, and people have access to foreign exchange, don’t forget that a lot of local industries have closed shop, because they could not purchase raw materials for their operations. But if the forex regime is okay and people have access to dollars, as it is at the flexible rate, most of those industries would be revamped and then, of course, demand for insurance will also increase ultimately because of course, insurance is based on the state of the economy.

So, if the local industries are revamped, some few weeks ago, you had about how some investors came onto the stock exchange, they brought in money to buy shares. Of course, capital is going to be available, and if capital is available, the economy will jump-start and a lot of activities will pick up and demand for insurance will increase automatically.


Source: Guardian