How insurers should manage exchange rate risk – Dr. Yusuf

Dr. Yusuf

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Chuks Udo Okonta

The Chief Executive Officer Centre for the Promotion of Private Enterprise (CPPE) Dr. Muda Yusuf, has identified investment in hedged assets, currency forwards, diversification of investment portfolio and more as means insurance companies could adopt to manage the volatile exchange rate risk

Dr. Yusuf, who spoke on a topic: ‘2024 Budget and Insurance Industry’ at the Year 2024 Chartered Insurance Institute of Nigeria (CIIN) Business Outlook in Lagos, stated that foreign exchange risk arises when a business financial performance could be affected by change in exchange rate.

He also advised insurance operators to adopt currency options in foreign exchanges; currency forwards and forward contracts.

He said foreign exchange rate risk, brings about increase with forex exposure of business; putting offshore investors in big risk and adverse impact on companies balance sheet.

On how insurance companies can remain resilience in the face of the economy maladies, he submitted that there should be flexibility and nimbleness of business model to reflect current market dynamics.

He also noted that insurers should embrace innovation; hedge against volatile macroeconomic variables, especially exchange rate; leverage technology for better efficiency and cost effectiveness; collaboration and partnership and scenario planning.

Other measures according to him include; deepening customer focus or customer centric business strategy; cost containment; minimizing forex exposure in business operations because of exchange rate risk and minimizing exposition to bank credit because of interest rate risk.

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