Big names dominate as Nigeria’s insurance sector seeks next growth phase


Nigeria’s insurance sector is dominated by a few big company’s meaning it is increasingly difficult for smaller players to compete and ultimately push the sector to its next growth phase.

For instance, recent report have it that African Reinsurance, a Pan African insurance company controls 65 percent of reinsurance market, While Continental Reinsurance and WAICA are left to jostle with the remaining 35 percent.

Owolabi Salami, the Chief Responsibility Officer of Ensure insurance said that one of the stumbling blocks to reinsurance business is the basic principle that on any risk, firms cannot write more than 5 percent of shareholders fund.

“If l have N5 billion, I cannot write more than N250 million and the rate may not be more than N400 thousand. That is one limitation,” said. It we all grow our shareholders fund by investing in equity and retain more cash for future expansion, investors will find our assets attractive and the market value of the firms will be maximized,” said Salami.

Experts are calling on National Insurance Commission (NAICOM) to provide a level playing ground that would bolster the performance of local operators.

The third quarter 2016 cumulative gross premium written (GPW) of NSE Insurance 15 index, compromising 15 of the most liquid insurers, stood at N117.51 billion, which is lower than the African’s Re’s GPW of N201.15 billion NSE 15 insurance index total asset in the same period was N396.45 billion, lower than African Re’s of N419.21 billion.
Top Industry players are calling on the regulator to encourage a scheme of mergers and acquisition (M and A) as it was done in the banking sector that produced 25 strong lenders.

A scheme of M and A will strengthen the balance sheet of insurers, eliminate wastages, and generally increase investor appetite in for the industry. Such strategic move will invariably place these firms in a position to undertake bigger risk.

“You still have the top six insurance companies owning and controlling more than 60 per cent of the market and that means the other 50 companies are not doing as much,” said Kabir Okunlola, Head insurance audit group KPMG.

Aigboje Aig-Imoukhuede, Chairman of Wapic Insurance, during the KPMG Insurance conference for 2017, called for increase in the capital base of insurance companies in the country to N100 billion.

Insurers in Africa’s most populous nation have been grappling with a myriad of challenges like an economic downturn that saw the country slip into its first recession in 25 years.

Also, lack of skilled staff that understand the technicality of the business, obsolete technology and cultural and superstitious belief that taking a cover is a premonition of one’s death, leaves the sector fragmented and growth stunted.
These challenges make the country’s market underdeveloped and fragmented despite its huge population.

According a recent report by KPMG on the insurance sector, there are 32 non-life insurers, 17 life insurers, and 10 mixed companies catering for a total market of $1.6 billion (N320 billion).

The aforementioned figures are low when compared with South Africa, the continent most developed economy that has 179 insurance companies, but it serves the market of $51.6 billion (N10.2 trillion).

The average company size is also more than 10 times bigger than Nigeria, according to the report.

The insurance industry grew 1.1 percent in the fourth quarter versus 5.1 percent year on year, according the National Bureau of Statistics (NBS). The economy shrank for a fourth consecutive quarter in the three months through December and contracted 1.5 percent for the whole year, NBS said.

In spite of the economic recession stunting the growth of companies, the insurance industry is poised for consolidations.
South Africa’s Mutual Liberty acquired 75 percent of UNIC Insurance Plc, a Nigerian insurer for a deal worth $12 million (N3.60 billion).


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