Insurance Industry’s Contribution to GDP Rises by 40%

Nnamdi Duru

The contribution of the insurance industry to Nigeria’s Gross Domestic Product (GDP) has risen by as much as 40 per cent over the last two years; going up from 0.5 per cent in 2010 to 0.7 per cent in 2012.

The Managing Director of Leverage Insurance Brokers Limited, Hon. Lanre Laoshe, affirmed this in a recent presentation showcasing the industry at an investors’ forum in Lagos.
In the paper titled, ‘A Brief on the Nigerian Insurance Market’, he said the Nigerian insurance industry has continued to grow with the number of policyholders rising from 0.5 million in 2010 to 1.5 million by the end of last year.

"The Nigerian insurance industry is a dynamic and rapidly growing one. It is supervised by the National Insurance Commission (NAICOM), which is poised to ensure that the market grows to a level commensurate with contemporary economies. The number of policyholders has increased from 500,000 in 2010 to 1,500,000 in 2012. During that period, the ratio of premium income to GDP increased from 0.5 per cent to 0.7 per cent," he stated.

"In spite of these, when compared with other economies on the continent, there is still room for growth in the Nigerian insurance market," he added.

Laoshe said there were 49 insurance companies in the market, consisting of 10 composite insurers, 7 life specialist companies and 32 non-life risks underwriting companies, with the shares of 17 of them quoted on the Nigerian Stock Exchange (NSE).

He also said other operators in the market were the 3 reinsurance companies including the continental reinsurer, African Reinsurance Corporation (Nigeria-Re), 447 Insurance Brokers, 5 Loss Adjusters and 2,800 Insurance Agents.

Laoshe also highlighted some of the initiatives introduced by NAICOM in its bid to drive growth in the industry, saying the Market Development and Restructuring Initiative (MDRI) is a template for enforcing the compulsory insurance of public buildings and buildings under construction.

MDRI also seeks to put in place adequate insurance protection for liabilities associated with use of such buildings, increase the number of insurance agents to introduce insurance products to drive the mass market as well as the introduction of Micro insurance products in the market, he explained.

According to the insurance broker, the insurance regulator is also enforcing the compulsory professional indemnity insurance for Health Management Organisation (HMOs) and property insurance cover for hospitals under the National Health Insurance Scheme (NHIS).

The regulator also enforces the mandatory group life assurance for all employees as prescribed by the Pension Reform Act, 2004 in addition to making annuities as veritable means of paying pension to retirees, he said.

Laoshe also recalled that NAICOM is engaging stakeholders on the compulsory aviation insurance as mandated by the Nigerian Civil Aviation Act, 2006 while enforcing the Nigerian Oil and Gas Industry Content Development Act, 2010.

The law provides that all assets, operations and liabilities of companies operating in the Nigerian oil and gas industry must be insured by a Nigerian insurance company through a Nigerian registered insurance broker, he recalled.

"This has resulted in an increase from 10 per cent retention of oil and gas risk to about 70 per cent currently. Besides these, there are the legacy mandatory insurance covers of motor vehicle and marine. The market is so attractive that between 2011 and 2013 the number of insurance companies with foreign equity has increased from 3 to 10," Laoshe stated.

Foraying into the future, he said there are better prospects for the insurance industry, hinging his optimism on the fact that the industry would be called upon to cover some of the risks associated with economic growth and development in the country, going forward.

"The Nigerian economy, according to experts, is expected to grow appreciably and this will be led by infrastructural development and the private sector investments. This will drive purchase of insurance products to secure investment and protect against liabilities," Laoshe predicted.

Source: Thisday