Following the unending spate of bombings and other terrorist acts in the country, a frontline stakeholder in the insurance sector, Mr. Yemi Soladoye, has advised insurance industry operators to identify available opportunities embedded in the crisis instead of staying away from it completely.
In a chat with New Telegraph, Soladoye, who is the Managing Director, Riskguard Africa Limited, said although terrorism insurance was ano excluded terrain under a typical insurance cover, the operators could still come together, develop a product and also bring in the government so that if the level of compensation reached a certain level then the government could come in to support them.
He said, "It is always like a disaster, something like flood. What the government does in that case is to create something like a national insurance company to handle such disasters. The underwriters themselves can also come together by creating something like a pool or a company for that purpose and enter into an agreement with the government so that there would be a succor for people suffering from that.
"Basically, what they need to do from the present situation is for the insurance industry to see it from the angle of opportunity, create products and provide the necessary cover."
Nigeria has been experiencing series of terrorist attacks from the dreaded Islamic sect, Boko Haram, in the last three years with the latest one occurring in the heart of the Federal Capital Terrorist last week leaving over 20 people dead and several others seriously wounded. Since the development was alien to the country for a very long time, the underwriting industry had never made it part of their product design.
Only recently, the Commissioner for Insurance, Mr. Fola Daniel, said it was time the operators expedite action and designed ways of providing insurance cover on terrorism.
Describing terrorism as the bane of the country, he called on firms to rise to the challenge of providing cover for terrorism to avert loss of businesses in the industry.
He advised the operators to take the initiative on terrorism insurance before an agency is set up to provide for risks on terrorism, stressing that the commission work work with the operators to see that the government supports the initiative as done in other climes.
In the United Kingdom, following the Baltic Exchange bomb in 1992, all UK insurers stopped including terrorism cover on their commercial insurance policies with effect from January 1, 1993 (home insurance policies were unaffected). As a consequence, the government and insurance industry established Pool Re. Primarily funded by premiums paid by policyholders, the government guarantees the fund although any such support must be repaid from future premiums.
To date no government support has been necessary. On December 26, 2007, the President of the United States signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 which extends the Terrorism Risk Insurance Act (TRIA) through December 31, 2014.
The law extends the temporary federal Program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.
Terrorism insurance is considered to be a difficult product for insurance companies, as the odds of terrorist attacks are very difficult to predict and the potential liability enormous. For example, the September 11, 2001 attacks resulted in an estimated $31.7 billion loss.
This combination of uncertainty and potentially huge losses makes the setting of premiums a difficult matter. Most insurance companies therefore exclude terrorism from coverage in casualty and property insurance, or else require endorsements to provide coverage.
While urging the insurers to look deeply into the crisis so as to unearth hidden opportunities, Soladoye observed that kidnap and ransom insurance that were already available in other jurisdictions are yet to be fully introduced in Nigeria..
He also pointed out that the impact of the current terrorist acts in the country was bound to further increase the premiums paid on behalf of the military despite the fact that their premiums remain one of the highest in the industry. In 2011, the armed forces claim was over N.3billion out of a total of N1.9 billion paid by insurers to policyholders under the Group Life schedule.
"From time, premium from the military is always the highest because of the nature of their job. In the present circumstance, what they could do is to further reload the premium or exclude some risks," Soladoye added.
Source New Telegraph
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