By Eromosele Abiodun
Despite fears been nursed in some quarters over the future of the Nigerian economy, the nation's insurance sector has in the last one year attracted about $750 million in foreign direct investment.
Analysts believe the major driver behind the massive investment in Nigeria has been 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.
The CBN had in August 2010 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.
In the circular on the Review of Universal Banking Model, CBN's Director of Banking Supervision, Mr. Samuel Oni recalled that the apex bank in 2002, through the Universal Banking Guidelines, authorised banks to engage in non-core banking financial activities either directly as part of banking operations or indirectly through designated subsidiaries.
Leading global insurance companies took over 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. Last month, 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, having breakeven after little more than two years in Nigeria.
"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.
THISDAY findings showed that 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.
The NAICOM data for 2013 showed that Leadway Assurance Limited achieved the largest gross premium income raking in N41.8 billion. The next four are all quoted on the NSE: AIICO Insurance Plc made N22.8 billion, Custodian and Allied Insurance N20.5billion, Continental Reinsurance N13.8 billion and Mansard Insurance Plc N13.6 billion.
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