Notwithstanding the opportunities in the insurance sector, credit rating agency, Agusto & Co. Limited, has stated that the ability of operators to respond promptly to fiscal changes that may arise as a result of change in government this year, will be a key factor for industry’s performance in the near term.

Indeed, Agusto & Co. expects a modest performance by the industry in FY 2023, supported by the rising yield environment, noting that initiatives such as the bancassurance model, which would enable insurance operators to partner with the banking industry to deepen their reach in the retail market will also bolster the Industry.

The agency added that rate hikes for third-party motor insurance and the bullish growth track for microinsurance, takaful insurance and some new entrants in the conventional insurance landscape are also growth drivers for the industry.

It however warned that the country’s political environment will define the financial year 2023 for insurance operators.

“The first half of 2023 would be characterised by electioneering activities while the second half would bring a new administration and fresh ideas for fiscal and economic transformation. Possible election violence poses a downside risk that could adversely impact insurance operators, especially if it is a widespread occurrence across several states.

“In the near term, Agusto & Co. expects the introduction of a risk-based capital regime to gain momentum while NAICOM continues to implement policies and directives that would boost the Industry’s sustainability. A strong regulatory stance to claims payments, which resulted in the withdrawal of the license of some insurers in 2022, though being contested in the court of law, would remain in 2023 and possibly going forward as part of NAICOM’s efforts to sanitise the industry.

“The non-conventional takaful insurance segment which is an under-tapped area is already witnessing significant growth as evidenced by the marked 172% growth in GPI in FY 2021. We anticipate that the segment would continue on its upward trajectory in the near term. Takaful insurers offer alternatives to conventional insurance and their model is based on the concept of social solidarity, cooperation and mutual indemnification of losses of members.

“Agusto & Co believes that these alternative insurers would continue to leverage the large Muslim population in Nigeria estimated at over 100 million to grow the segment. Albeit, the relatively low awareness of these alternative products remains a challenge to be surmounted. Microinsurance is also poised for growth given the dwindling consumer purchasing power, large informal sector and relatively high poverty rate in the country”, the agency noted.