Yemisi Izuora
The Nigeria’s insurance industry is firmly witnessing boost in interest from major companies abroad, which are now consolidating their acquisition strategies.
Many of the companies are specifically attracted by improvements in headline indicators and motivated by low penetration rates in a rapidly expanding population and coupled with moves to broaden product options to include sharia-compliant policies.
With a population of over 168m growing at 2.5 percent a year – along with steady GDP growth of 6.3 percent in 2014, Nigeria offers sizeable potential for insurers, albeit in a crowded market.
According to the latest figures from market regulator, the National Insurance Commission (NAICOM), there are 58 policy writers operating at present, 29 of which are general insurance firms, 15 life insurers and the remaining 14 composite insurers offering a full range of services.
Recent NAICOM data shows that more than three million Nigerians have some form of insurance, up from less than one million in 2007.
However, coverage rates vary, with higher levels for property and automotive insurance and a low take-up of personal policies such as life or health.
With greater acceptance of insurance products, premiums and assets have soared over the past eight years.
Gross premiums rose from less than N100bn ($502m) in 2007 to N302bn ($1.51bn) at the end of 2014, while asset values more than doubled over the same period, from N347.1bn ($1.74bn) to N711.4bn ($3.57bn), NAICOM figures show.
However, Mr. Thomas Oluwadare said despite the positive policy direction of NAICOM, the Nigerian insurance market is largely untapped.
The rise in premiums is attracting new investors, in spite of the large number of existing players as more than twelve foreign insurers, including the UK’s Prudential Life and Liberty Group of South Africa, are already in talks with regulators to enter the market.
Fola Daniel, Nigeria’s commissioner for insurance said in late June that the regulator’s preference was for potential entrants to buy into existing firms, rather than be issued new licences.
This approach would be in line with the country’s regulatory strategy of previous years.
Changes in regulations introduced in 2007 by NAICOM lifting capitalisation rates prompted a round of mergers and acquisitions, with the number of firms in the marketplace falling from 117 to its present level.
This consolidation pushed out many smaller and marginally profitable operators, boosting competition and putting the sector on a much firmer footing.
Oluwadare believed that the market is big enough to absorb new players stressing that at the end of the day, the consumer will get a better product because there will be competition.
The D-G praised the regulators push to promote Islamic insurance, or takaful, in the Nigerian marketplace as part of insurance inclusion which he said could further strengthen the sector’s foundations and significantly deepen penetration rates.
While Nigeria issued the first set of regulations for the segment in 2013, NAICOM is still in the process of putting in place all of the supporting pillars for the development of Islamic insurance.
The potential for takaful in Nigeria is strong, with roughly half the population being Muslim – representing a client base of more than eighty million and, based on trends in other countries, Islamic insurance products also appeal to non-Muslims.
In March the central bank released guidelines for a new advisory agency to oversee the Islamic banking sector, a further step in developing the sharia-based finance segment.
By fostering Islamic banking and financial products, Nigeria will be able to reinforce acceptance of sharia-based services among its population.
This could create a new momentum in the insurance segment, with Islamic lenders opening takaful insurance windows through their networks, either by selling their own products or creating partnerships with dedicated sharia-compliant insurers.