By Yemis Izuora-Lagos
Fola Daniel-Nigeria’s Commissioner For Insurance
Foreign Direct Investment (FDI) so far attracted by the insurance sector has been put to about $750 million. This significant single industry feat happened in one year.
The major driver behind the significant investment is traceable to the decision by the Central Bank of Nigeria (CBN) to reverse universal banking licenses, which forced banks to divest insurance subsidiaries unless they opt for the holding company structure.
In August 2010, the CBN directed banks under its supervision to divest from their subsidiaries including insurance companies to enable them concentrate on their core banking business.
In the alternative they were asked to set up holding companies and bring all their subsidiaries under this umbrella.
Leading global insurance companies have either acquired or bought substantial equity of some Nigerian insurance firms in the last six months; a move experts say is strategic given growing middle class.
A breakdown of the acquisitions showed that South Africa’s giant Old Mutual took over Oceanic Insurance, Sanlam Insurance bought FBN Life Assurance, NSIA Participations took over ADIC Insurance and Greenoaks Global Holdings acquired Union Assurance.
Just last December, France’s Axa announced that it had acquired a 77 per cent interest in Mansard Insurance, formerly GTAssurance, for €198 million.
Analysts at FBN Capital stressed that global under writers are trooping to Nigeria because of the positive demographics and rising household incomes across Africa, sometimes dressed up as the emergence of the middle class.
“The new national accounts with a base year of 2010 were helpful in this respect. The same investment rationale can be applied to banks, retail, telecoms, and consumer goods manufacturing and advertising, “they said.
The analysts added that South Africa’s Sanlam views Nigeria as one of its star markets in Africa.
“It cited figures showing that insurance penetration stands at about 10 per cent in South Africa yet less than 2 per cent in Nigeria.
It might have added that the authorities are supportive, and we give the example of the requirement for all companies with at least five employees to provide life cover. Foreign companies can own insurance firms in full, and we can see their becoming the dominant players in the industry within this decade. This is obviously not the case with banking, “they said.
The industry has been growing since the universal banking reversal. A report by the industry regulator, the National Insurance Commission (NAICOM), showed that the sector recorded a total of N258 billion in gross premium income for 2013 and expects N1trillion for 2018. Recently, the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala projected N5 trillion gross premium income for the sector within 10 years.