Insurance: Beware of foreign investors

Daniel

Chuks Udo Okonta

If the words of the Barclays Africa's Deputy Chief Executive Officer, David Hodnett, that: "Every insurer that you look at in sub-Saharan Africa has probably about five or six suitors." Is true, stakeholders in Nigerian Insurance Industry especially the regulator – National Insurance Commission (NAICOM), has to pull a break to examine the crave for investments by some foreign investors.

This, observers believe is necessary, so as to check the incidence that rocked the Nigerian Capital Market in 2008 where profit seeking foreign investors pull their stakes and the market crashed.

Observers are also of the opinion that most of the investors are profit seeking and have not come to stay to grow and develop the market. According to them, this has been revealed by the recent trade of Mansard insurance Plc where Assur Africa Holdings which formerly held 77 per cent stake in underwriting firm, within two years of its operations, sold its stake to a France firm AXA for a whopping sum of N44.14 billion, raking in over N30 billion in two years.  

The regulator has been urged by the observers to thoroughly examine the objectives of these investors, through its regulatory approval measures and ensures that they do not just reap huge finance returns on investments, but help to develop the industry that is highly in need of human and capital developments.

An expert told Inspen that it behoves on NAICOM to demand for a developmental roadmaps from these investors before granting them approvals. According to him, NAICOM should ensure that any firm coming into the country must have a programme to take insurance to the grassroots and engage on activities that will help raise insurance penetration from its present position.

He said that the firms should be made to undersign a commitment to open more branches in areas where insurance practice is almost nonexistence, adding that for every one branch opened in the cities, three of four should be opened in less developed areas.

Observers said the quest to invest in insurance firms by foreign investors will continue to be on the rise especially as the fortune made by Assur Africa Holdings from Mansard has open the eyes of most investors of the huge returns on investments from Nigerian Insurance industry.

Commissioner for Insurance Fola Daniel, said the industry is now having respectable investment inflow which is as a mark of enhanced confidence in the Nigeria insurance sector.

He noted that even now, there is a quiet revolution in the sector with a number of voluntary mergers and acquisitions, adding that NAICOM has opened insurance hemisphere to foreign players.

“You will recall that prior to 2007 which was the latest recapitalisation exercise, we had about 100 insurance operators and government recognised that many of these companies were fringe players. It means they were unable to deliver on promises of timely settlement of claims.

“The new capital requirement incepted in 2007, was to inject quality to the practice of insurance and ensure world class service delivery to the citizenry. To some operators, our capital requirement is most draconian. Government took that measure to ensure that only serious players remained in the insurance industry and that was largely achieved.

“The incidence of delayed settlement of claims has reduced dramatically and we are having a measure of stability in insurance industry. Even now, there is a quiet revolution in the sector with a number of voluntary mergers and acquisitions. We have also opened insurance hemisphere to foreign players. We are having respectable investment inflow to the sector as a mark of enhanced confidence in the Nigeria insurance sector,” he said.

About the Nigerian Insurance Market

The Nigerian insurance market is the third largest in Africa with N313 billion (Euro 1.5 billion) GWP in 2013. The market is commercial lines oriented (70 per cent of the market), and made up of 75 per cent Property & Casualty and 25 per cent Life premiums. Main P&C lines include Motor, General Accident, Oil & Energy and Fire.

The top 10 players represent 80 per cent of the market in Life and 50 per cent in P&C. Distribution is dominated by agents for retail and brokers for commercial lines, while alternative channels, such as bancassurance or mobile insurance, are growing.

 

The Nigerian insurance market is highly underpenetrated with a premium to GDP ratio of 0.4 per cent. The market has enjoyed significant growth over the past three years, at 18 per cent per annum on average. There is significant upside given the low penetration of insurance and the strong prospects for the Nigerian economy, notably with the developing middle class. Market growth has also been boosted by government reforms such as mandatory Motor and Group Life insurance.

Nigeria is the largest economy in Africa, with a nominal GDP of Euro 378 billion in 2013, and the most populous country in Africa, with a population of 174 million inhabitants.