Insurers are waiting with bated breath for a potential N224 billion windfall from a stimulation of the industry by government’s record 30.7 percent capital expenditure in the 2017 budget that will trigger activity in infrastructure.
Analysts’ expectations are based on the effective implementation of the total budget of N7.2 trillion of which N2.24 trillion is allocated for capital projects. They regard the allocation, a great departure from past years which were below 20 percent, as the most favourable budget in recent times.
Specifically, they anticipate that the budget will trickle down insurance premiums of N224 billion or 10 percent from the capital expenditure through ‘Contractor All Risk Policy’, which typically support infrastructure and engineering projects.
Contractor all risks policy is specially designed to cover for losses or damage to predominantly civil engineering construction projects, ranging from small villas to construction of bridges or high rises.
Also, they expect that the planned rehabilitation of North-East, devastated by the activities of Boko Haram, will give impetus to insurance activities this year.
The diversification of the economy, which is the plank of the budget, according to analysts, will improve economic activity in the country, which will in turn bring about demand for insurance services.
Their expectations are reinforced by the promise of President Muhammadu Buhari at the presentation of the document to the National Assembly, that a lot of attention would be paid to infrastructure development in the 2017 budget, which will activate the engineering sector and cascade to other sectors such as insurance.
Paschael Onwumere, managing consultant, Premium Risk Limited, said: “I have analysed the budget and I have seen that in the history of Nigeria this is the best budget for insurance.
“For instance, you have a 30.7 percent capital expenditure of the total budget, and there is hope for diligent application of resources this time. So, insurance should benefit from the entire process.
“This should support activity in the area of Contractor All Risk Insurance (CAR) as well as Engineering insurances.”
Onwumere further said there is insurance incorporated in the recurrent expenditure and that he hopes this is done right this time around.
“We are not going to see a situation where insurance is carried overhead and spent on something else. This is the best budget for us and insurance is positive,” he said.
Bismarck Rewane, managing director/CEO, Financial Directives Company Limited, had said presentation of 2016 budget earlier in the year that construction companies would return to site and that this step is expected to contribute to construction and engineering All Risks Premium income.
Though these could not happen because of unanticipated distractions in the economy, this is hoped would materialize in the coming year.
“As the Federal Government inaugurates the committee on North-East rehabilitation, the following insurance covers are expected –Terrorism, Kidnap and Ransom – especially for the expatriates, construction and engineering all risk,” Rewane said.
Ekpe Ukpabio, managing director, Equity Assurance plc, had also stated that prospects are bright for insurance business, in spite of the fall in the price of oil.
“The federal budget indicates diversification to other areas of revenue generating ventures, and this will improve economic activities in the country, which will in turn bring about demand for insurance services,” said Ukpabio.
Contractor All Risks policy can be taken out in the joint names of the contractor and the employer and so enables the contractor or employer to comply with the insurance requirements of the contract. Cover can be extended to include constructional plant as part of the Contractor All Risks cover.