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Nigeria Insurance Report 2009
Business Monitor International, March 2009, Pages: 71
BMI's Nigeria Insurance Report provides independent forecasts and competitive intelligence on Nigeria's insurance industry.
The biggest developments in Nigerian insurance include the National Insurance Commission, NAICOM, seizing control of the largest insurer, NICON, in November 2007, part of a long standing tension between the commission and Nicon. As of June 2008, Nicon Insurance had appointed a new Managing Director and two Executive Directors to run the affairs of the company, following an out of court settlement agreement reached between the core investor, Mr Jimoh Ibrahim, and NAICOM. The commission continues to keep NICON Insurance and Nigeria Reinsurance Corporation under surveillance in an effort to ensure an acceptable level of operation and compliance with relevant laws, regulations and guidelines.
In addition, the insurance sector has seen dramatic changes following the announcement by the National Insurance Commission (NAICOM) in September 2005 that it was setting in place increases in capitalisation requirements. It gave companies until February 27, 2007 to comply with the new levels that were set at N2bn (US$15.3m) for life insurance companies, N3bn for general insurance concerns and N5bn for composite insurance businesses. Of the 104 insurance companies and four reinsurance companies in existence before the reforms, 49 underwriters and two reinsurers met the new levels and were certified by the government in November 2007. Further mergers are likely, however, and there have been criticisms that these reforms have not been significant enough. For instance, there was no closure of poorly performing companies and the sector continues to suffer from a very poor image and high distribution costs.
Hard numbers on Nigeria’s insurance industry continue to be very hard to find. Few companies publish financial details that are more recent than 2006: for some, the latest figures are even older. NAICOM has not published statistics for the industry since 2004, when it released the numbers for 2002. However, press reports indicate that premiums have been growing rapidly. Given the expansion in the economy and the prospects of fresh capital for the insurance companies, this is not surprising. Overall penetration rates remain very low, however. According to Swiss Re Sigma reports, the insurance penetration level in Nigeria is a mere 0.6%, much lower than other emerging markets, even in Africa. NICON traditionally had a market share of 40-50%. Most recent data suggest that this market share has begun declined, possibly quite significantly. Information compiled from Company websites; Speeches delivered at Insurance Future Summit 2008 Conference, Lagos, April 2008; and Press Reports suggests that Nicon now holds a comparable share with other Nigerian insurance companies. Overall, the share each company in the sector holds is still very small. According to a paper presented at the Insurance
Future Summit 2008 Conference, Lagos, April 2008 by AFRInvest West Africa, the average company reported around NGN1.5bn of GPI in 2006. The insurance sector is fragmented and consists of companies that are very small by most standards. There is also a high level of brokerage, with over 500 firms in 2006 who act as intermediaries between corporate customers and underwriters. There is potential for opportunity as the economy is growing, reforms are underway and the robust oil and gas sector could create significant insurance opportunities. Nonetheless, there are still a wide range of challenges facing the underdeveloped insurance sector in Nigeria. In his paper delivered to the Insurance Future Summit 2008 Conference, Omobola Johnson, the Country Managing Director of Accenture Nigeria outlined what he saw as the major challenges facing the Nigerian insurance sector. These included: very poorly developed distribution channels as influence of brokers remain high, with insurance brokers possibly controlling as much as 80% of non-life business; collections remain poor, resulting in relatively high receivables; unsophisticated products offerings, with only a few companies creating new opportunities and exploring ways of filling existing gaps in the market; poor public perception, market is suspicious of insurance companies’ willingness to pay claims as and when due; lack of requisite skill to participate in highly specialised transactions especially in high value risk segments such as marine, aviation, oil and gas; inability to attract and retain skilled talent; low technology leverage; low investment and asset management capabilities; and poor regulatory oversight.
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