Research firm proffers solutions to sector’s problems via new report
This was revealed in the latest report on the sector released by pan-African credit rating agency, Agusto & Co. in Lagos last week.The report noted that insurance industry’s low penetration rate Gross Premium Income (GPI), as a percentage of Gross Domestic Product with 0.4 per cent presents huge growth opportunities.
According to the report, evolving risks such as job losses, cyber risk, and a host of others offer prospects for the development of new insurance products.
The anticipated government spending in construction could support growth in the industry bonds, group life, and workers’ compensation, and many others.The report stated that micro-insurance is also expected to gain traction on the back of a large populace, which remains outside the insurance coverage.
Meanwhile, the report stated that the industry underwrote risks of over N300 billion in 2015 through motor, oil and gas, general accidents, fire, marine and aviation and life insurance, and others.
Although, the report also projects that the industry’s Gross Premium Income (GPI) will grow by eight per cent in 2017, hinged on a probable devaluation, infrastructure spending and continued growth in life business and 10 per cent growth in GPI in 2016
The Executive Director, Financial Institutions Ratings Agusto & Co., Mrs Yinka Adelekan, said the growth achieved in the insurance sector was despite some drawbacks operators faced in implementing the IFRS due to shortage of skilled human capital as well as technology gaps.
According to her, the Industry witnessed a rise in underwriting activity in the oil and gas and marine insurance business segment driven by the enforcement of regulations in the sectors.
“The insurance sector also witnessed a growth in claim payments and underwriting expenses which hampered underwriting performance,” she explained. Nevertheless, the report showed that insurers were able to capitalise on favourable interest rate regime in their full year 2012 results to generate investment income.
Agusto & Co. estimated that the life business in 2015 grew by a marked 54 per cent; however, penetration rate of the segment remains low at 0.045 per cent (Kenya: 1.2 per cent, South Africa 11.4 per cent).
Expected increase in motor GPI arising from asset revaluation, although growth will be tampered by a switch to cheaper motor insurance covers such as third party insurance.
The Nigerian insurance industry also marked its first financial year since the implementation of International Financial Reporting Standards (IFRS). As at January 15, 2014, only 44 out of the 59 insurance operators had their 2012 financial accounts approved by the industry regulator, Naicom.
However, the National Insurance Commission (Naicom) has repositioned to reverse this trend with N1 trillion industry premium incomes in 2017, and increased traction of the Market Development and Restructuring Initiative (MDRI).