By Modestus Anaesoronye
With catastrophe losses in the global economy rising to $125 billion between 2012/13 and the increasing volatility of most foreign markets, there are growing enquiries by foreign insurers to take position in the Nigeria market, BusinessDay has learnt.
To them, the Nigerian market is reasonably safe since there has not been any significant claims experienced from catastrophe risks, and this ironically may account for why local players have not done much to protect themselves against such risks.
Though Sunday Thomas, director general, Nigerian Insurers Association (NIA) accepted that Nigerian insurance industry may not have prepared for catastrophe, he pointed that no market anywhere in the world can withstand catastrophic loss.
"Insurance is about risk sharing and that is what we do. But when it gets beyond a market like in any other market, the whole world shares it."
Thomas noted that the Nigerian market is safe and that is why the industry has not seen the kind of tsunami as found elsewhere, pointing that the safety is a major attraction to most foreign investors.
Just recently, Peter Carter, the deputy British high commissioner, led a team from Prudential plc, a life insurance company in the United Kingdom, on a courtesy visit to the National Insurance Commission (NAICOM), where he said they were in the Commission to apprise the Commissioner of the intention of Prudential plc to invest in the Nigerian insurance market and to inquire about the modalities for entry.
Matt Lilley, the director of strategy and corporate development at Prudential plc, informed the CFI that his company is a purely life insurance entity and have been in operation for 165 years, adding that the Company is keen and eager to enter the Nigerian market for big ticket businesses.
Though there has not been any significant claims experience, analysts are doubtful if local insurers have got the needed absorption capacity.
To them, these aspects of risk management have not been taken very seriously because of its long term gestation, which sometimes span over 200-250 years.
Ken Aghoghovbia, deputy managing director/COO, Africa Reinsurance Corporation (Africa Re), told BusinessDay in a telephone interview that local insurance companies would probably have adequate protection for the risks they carry, but would not say they have adequate cover for catastrophe risks.
"Majority of the companies are well protected, but for catastrophe risks, I do not know," he pointed out.
Aghoghovbia stated that the challenge is if the companies really identify their risk exposure that could be catastrophic in nature, stating that "what determines your retention capacity for catastrophe risks is capital base and the amount of money you have in the bank.
Speaking further, Aghoghovbia added: "I do know also that a few insurance companies take more than their capacity, and in such case it could be dangerous," he noted.
In a preliminary report, Sigma estimates that insured losses from natural catastrophes and man-made disasters in 2013 are estimated to be around $44bn, down from $81bn in 2012. Insured losses from natural catastrophes are at least $38bn, down from $75bn, while man-made disasters generated the remaining $6bn of insured claims in 2013, little changed from 2012.
The overall economic losses from this year’s catastrophic events reached $130bn, compared with $196bn in 2012. The total loss of life climbed to around 25, 000 from 14, 000 last year.
Source BusinessDay
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