IMPLEMENTATION challenges and the impact of the 2008 financial crisis on the insurance sector may have been some reasons the Market Development and Restructuring Initiative (MDRI) projected N1 trillion gross premium income by the year 2012 could not be achieved.
Notable among the negative impacts were the huge losses suffered by insurance companies as a result of the near collapse of the Nigeria capital market and decline in the growth of personal lines as a result of 2009 changes in the financial services industry.
The Commissioner for Insurance, Fola Daniel, speaking at the National Insurance Summit 2014 in Abuja, said at the year ending 2013, the gross premium income of the industry only grow to N300 billion from N101 billion in 2007.
He explained that although the 2013 achieved gross premium income puts Nigeria as third from fifth position in Africa, we know and convinced that we can do a lot better.
According to him, the key challenges to growing the industry has been how to get sufficient number of potential customers to buy insurance. This decision is influenced by factors such as the image of the industry, financial literacy, economic constraints and attitude of the consumers, amongst others. There is also a mutually reinforcing relationship between growth in insurance industry and the level of national economic development.
He said that in advanced economies, personal lines insurance for example, has acquired a cultural status and is given priority as a means to mitigate various risks and reduce incidence of poverty. It is not the same in Nigeria. The major question to answer therefore will be, what to do in Nigeria to break barriers and release the potential that ought to come with demographic advantage.
The NAICOM boss explained that the FSS2020 strategy was reviewed in May 12013 in the light of implementation experience and the need to focus efforts on fewer more impactful transformation programmes and installing a measurable implementation framework. The result of this effort was improvements in the key elements of the strategy. The transformation initiatives for the insurance industry were reduced to three main themes as follows: Mass insurance encouragement; improving insurance market conduct framework; coordination for insurance regulatory enforcement.
The execution elements of the project were decided and validated after a two days workshop that enlisted the participation of 30 industry stakeholders. Relevant elements of our market development and regulation strategies have been adjusted to reflect the outcome of the review and decisions reached. It is important to say that the implementation of these changes have not been without challenges, principal amongst which are the resistance to change, resources constraints, internationally uncompetitive tax regime for the insurance industry and change overhead.
It is our expectation, he said, that the interaction in this summit will result in workable programmes that will not just address these challenges but also identify initiatives that will radically transform the industry to enhance its relative contribution to the nation's economy.
"He said "A critical landmark in the regulatory history of the insuancce industry took place in the year 2007 when the commission increased the minimum capital base to N2 billion, N3 billion and N10 billion for life, general and reinsurance businesses respectively. This led to reduction in the number of insurance companies from 103 to 61 and reduced the unethical competition that threatened the industry then, The industry was, however, affected by the 2008 financial crisis as many insurance companies lost their investments in the capital market and access to capital was significantly impaired by the economic crisis that follows. It also affected the demand for insurance especially the personal lines that were growing as a result of the growth in financial services industry."
According to him, in addition to capital requirements, the commission has since then introduced a wide range of regulatory guidelines which in addition to other market development initiatives were targeted at strengthening insurance institutions, building confidence in the insurance market and significantly improving the attractiveness of the insurance industry to both local and foreign investors. The growing interest of international investors in our industry as evidenced by the entry of major insurance companies and groups such as Metropolitan Life, Sanlam, NSIA, Old Mutual and quite recently, AXA is a testimony of the success of our past efforts.
Besides, our current regulatory agenda is driven both by our experiences in the past seven years, the insurance core principles issued by the International Association of Insurance Supervisors (IAIS), the outcome of the study on the market we undertook in collaboration with GIZ in 2013, the findings and recommendations in the IMF-World Bank FSAP report on the Nigerian insurance industry, he said.
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