Of an estimated Gross Premium Income (GPI) worth N356 billion generated by the insurance industry last year, 28 per cent was paid out as claims to help individuals and businesses to recover from their losses, a report by Agusto & Co has shown.
Agusto, a pan-African credit rating agency in the report, said the industry’s regulatory environment was likely to change in the near future because of the macro-economic climate. It noted that this might lead to mergers and acquisitions as well as foreign direct investments.
The report said the role of insurance in the economy could not be overstated. According to the report, its strategic importance in underwriting business and individual risks is evident in an estimated gross premium income of N356 billion generated by the industry in the year under review, reflecting a 10 per cent growth over 2015 financial year.
Agusto & Co also projected a moderate growth rate of eight per cent in the year based on the recession expected to have significant impact on major businesses.
The report read: “The Nigerian insurance industry is a major contributor to economic growth and development as premiums collected are invested in banks and deployed to fund government projects.
‘’In 2016, the industry invested an estimated N178 billion in the banking industry as placements and deposits and held Treasury instruments of over N270 billion. We expect increased investments in government securities in 2017 as insurers take advantage of higher interest rates.
“Opportunities in the industry abound as the penetration rate stood at 0.4 per cent in 2015. Insurance density rate, which measures GPI as a proportion of population is $8.3 compared to Kenya’s $36.4 and South Africa’s $970.8. Going forward, evolving risks such as job losses, cyber risks, among others, will offer prospects for the development of new insurance products.
“We expect increased government spending in the near term, which will support GPI growth. In addition, micro insurance – which allows people purchase insurance cover in small daily premiums using mobile phones – is expected to gain traction in the near term with Insurers using various avenues to reach the un-captured market. The current inflationary pressures have an upside on the industry’s investment portfolio performance as interest rates soar to overcome rising inflation and negative returns on investments.
“We expect these positives to offset the negatives in the Industry; therefore, we attach a stable outlook to the insurance industry.”
Agusto stated that the industry would also benefit from a probable naira devaluation and continued growth in life business this year.
“Like most other industries operating in Nigeria, the industry was adversely impacted by the downturn in the economy, which had its roots in declining crude oil prices since 2014. The economy went into a recession in the third quarter of 2016, following two consecutive quarters of negative GDP growth.
“This slowed down activities in various industries, including the industry. Inflationary pressures also had a negative effect on cost of operations as well as the value of long term savings. Reduced consumer purchasing power threatened GPI growth and increased surrenders in the life business segment. In the non-life segment, we observe a preference for less expensive insurance covers such as third party insurance cover as against comprehensive motor insurance cover.
“The foreign exchange (forex) demand management tactic adopted by the Central Bank of Nigeria (CBN) in controlling outflows from already depleted reserves resulted in a scarcity of forex, which in turn impacted dollar denominated premiums negatively.
“The naira depreciated significantly against the dollar, trading at N305/$ to N315/$ in the interbank market and as high as N498/$ in the black market. The resultant effect is a reduction in the insurance cover on assets such as motor vehicles whose prices have almost tripled. We expect these forex challenges to persist in 2017.
“The industry’s regulatory environment is likely to change in the near term in response to the current macroeconomic climate. Regulators are beginning to emphasise risk profiles of insurance companies as against amount of capital held. The proposed Risk-Based Supervision framework, which is expected to be implemented in the near term will prompt reviews of business strategies.
“As a result, we foresee mergers and acquisitions in the Industry as well as foreign direct investments in the near term,” the report added.
the introduction of policies aimed at promoting the local market. Nonetheless, the industry remains challenged with low apathy from the Nigerian populace and weak policy enforcement practices, resulting in a low penetration ratio of 0.4 per cent. These challenges, however, present enormous opportunities, which we have identified in our report. In addition, we have evaluated the current macroeconomic climate and the impact on the Industry and provided forecasts for two years,” it added.
Category: Insurance
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Firms pay 28% of N356b premium income as claims
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Zenith worker is ‘Miss Insurance’
A staff member of Zenith Insurance General Limited, Miss Ezekiel Precious, has emerged winner of this year’s Miss Insurance Beauty Pageant.
Precious, who was declared winner at the Miss Insurance Beauty Pageant organised by the Chartered Insurance Institute of Nigeria (CIIN) in Lagos, was given a Kia Cerato.
The pageant featured contestants from Sovereign Trust Insurance (STI) Plc and Leadway Assurance, among others. The second position was won by Miss Olaniran Adesola Shalom of STI, who went home with a 45-inch colour television and a home theatre sound system.
The third position went to Miss Judith Nduanusi of Zenith Life Insurance Limited. She received a deep freezer.
CIIN President, Lady Isioma Chukwuma said the new queen was expected to carry herself with dignity to project the image of the industry.
According to her, she is expected to have a pet project, which would promote insurance consciousness among people.
She said: “We leave it up to them to have a pet project but we encourage continuity so that what a queen starts, do not terminate at the end of her tenure. When a new queen emerged, we encouraged her to start where her predecessor stopped. The idea is a way of encouraging them to reach out to the public.
“She is the ambassador of the industry. She represents the industry whenever there is an event and that is why we are hammering on not just beauty but brain. She is expected to be knowledgeable about insurance and insurance affairs.”
Lady Chukwuma noted that lack of adequate publicity would have led to why people feel the impact of the beauty pageant is not felt, adding that the institute had been working assiduously to see that the queens execute their pet projects.
She added that lack of courage from insurance companies’ workers would have resulted to the level of participation in the contest, adding that one of the challenges the institute faced in organising the contest was sponsorship but that with help from some companies it was surmounted. -
Babington-Ashaye’s book for launch tomorrow
An insurance book entitled: Insurance in Practice – What you need to know about Insurance in Nigeria will be presented tomorrow at the Nigeria Institute of International Affairs (NIIA), Victoria Island, Lagos.
The book is written by a former Managing Director, NICON Insurance, Cornerstone Insurance and now, Risk Analyst Insurance Brokers Limited, Mrs. Funmi Babington-Ashaye.
According to the author, there is need to deepen insurance knowledge in the country and bring to fore the fact that insurance is a human and business necessity. This is the key motivating factor for writing the book.
The author brought her over 30 years’experience in the industry to bear on the book whose Foreword was written by Olola Bode Ogunlana, the Doyen of the insurance profession in Nigeria.
The occasion would be chaired by Chief Ajibola Ogunsola, the first Nigerian professional Actuary and Chairman, Continental Reinsurance Company Limited.
The Special Guest of Honour is the Commissioner for Insurance, Alhaji Muhammed Kari. -
Panic grips insurers over NAICOM capital verification
•Companies seek investors
There is panic in the insurance industry over the upcoming verification of insurance companies’ capital by the regulator, the National Insurance Commission (NAICOM), The Nation has learnt.
While many insurers are panicky, a few others are confident that their books are clean.
It was learnt that inspectors from NAICOM’s Lagos office have in the past few days commenced offsite verification on the insurance companies. The offsite verification is the preliminary examination of the yearly reports by the supervisors based on their face values.
A source in the Commission, who spoke with our correspondent on the condition of anonymity, said some insurers were making moves to shore up their capital by injecting funds by any means possible, forgetting that any funds injected have entry date.
The source said the Commission would detect any foul move through Biometric Verification Number (BVN) with the help of Central Bank of Nigeria (CBN).
Capital verification, one of NAICOM’S regulatory priorities for the year, will entail verification of insurance firms’ assets and liabilities with the cost of the exercise to be borne by the companies.
In preparation for the exercise, Commissioner for Insurance, Mohammed Kari, had in the 2017 agenda, advised Boards to ensure fairness in valuation of assets and liabilities of their companies when presenting the financial statements for the year ending 31 December, 2016.
He said professionals that participate in the financial reporting supply chain are expected to ensure they do their jobs professionally in the valuation of assets and liabilities, as well as in the issuance of opinion on financial reports. They are to discharge their duties creditably in accordance with relevant laws and professional standards.
Meanwhile, the source said the exercise, when concluded, might force many of the companies operating below capital base of N3 billion for Life insurance business, N5 billion for General business and N10 billion for composite business to recapitalise, merge or seek fresh investors for acquisition as witnessed in the sector in 2007.
He said this time, the recapitalisation would be structured through the implementation of Risk-Based Supervision (RBS) framework, which would categorise underwriting firms into tiers of risk businesses to underwrite, he added.
He stressed that companies that fail to shore up their capital appropriately risk losing their operating licences.
He said: “With the new RBS supervision template, insurance companies will no longer operate a uniform capital base, but their capital would be determined by the risk they undertake.
“Insurance companies’ capital base will now be dependent on the value or specific area of risks they carry as a business, different from what obtains currently where all the companies have the same statutory level of capital either as general or life business.”
Meanwhile, some companies have started restructuring to meet up with the demand of the regulator. For instance, International Energy Insurance (IEI) Plc is set to recapitalise by raising N13 billion from the market.
It Interim chairman, Mohammad Ahmad, said the development was as a result of the approval given the Interim Board to recapitalise the company for growth and competitiveness. According to him, the expected new capital when injected would enhance the firm’s working capital, improve IT infrastructure, meet solvency requirement as well as boost investment opportunities.
Last month, Standard Alliance Insurance Plc announced that it has merged with its sister company, Standard Life Assurance. The Managing Director, Bode Akinboye, said the merger would make the underwriting life and non-life insurance businesses to become one big company.
South Africa’s Liberty Holdings is also set to acquire a 75 per cent stake in a Nigerian long-term insurer, UNIC Insurance Plc for 160 million Rands (about $12 million).
The company sought approval from the Nigerian Stock Echange (NSE) for restructuring. Liberty has been expanding beyond its home base to other parts of Africa where demand is rising from a growing middle class. Part of Liberty’s strategy is to grow its presence in West Africa through the long-term insurance business and entering the asset management business.
Liberty Chief Executive Thabo Dloti said it was pursuing its strategy of expanding in the region, noting that they see Nigeria as a market of the future.
It may be having difficulties now, but everything indicates to us that in the long term, Nigeria is going to be a big contributor of growth if you are doing business in Sub-Saharan Africa, he said.
Chairman, Sub-Committee on Publicity and Communication, Oye Hassan-Odukale, while briefing reporters at an Insurers Committee meeting said insurance companies’ capital base would be dependent on the value or specific area of risks they carry as a business.
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Google, others for ICT conference
Global technology giant, including Google, MTN, Airtel and MainOne, are set to lay out strategies to deepen insurance penetration in Nigeria with the use of Information and Communications tools, at an E-Insurance Conference scheduled to hold on March 23, at Sheraton Hotels and Towers, Ikeja, Lagos.
The conference with the theme “Driving insurance penetration with Information and Communication Technologies (ICT)” is being organised by Pinet Informatics.
Pinet Informatics, Managing Director, LanreAjayi, said speakers from Google, MTN, MainOne, Airtel, VDT with leading key experts from both insurance and ICT industries would brainstorm on how to use technology to drive the insurance penetration in the country.
Dignitaries expected include the Managing Director of MTN Nigeria Communication Limited, Ferdi Moolman, who will speak on “The imperatives of adequate Internet Connectivity in a modern insurance sector” alongside Managing Director of VDT communications, Biodun Omoniyi, while the Country Manager, Google Nigeria,Mrs Juliet Ehimuan-Chiazor will speak on the “Expectations of Insurance Consumers in the Information Age,” among others.
He said the President, Chartered Insurance Institute of Nigeria (CIIN), Lady Isioma Chukwuma, will chair a panel on “Ensuring curriculum compliance with modern trends in Technology.”
Notable experts on the panel are the Director-General, Nigeria InsuranceAssociation (NIA), Sunday Thomas, former Chairman, EducationCommittee (CIIN) and its former President, Bola Temowo, Director General, Chartered Insurance Institute of Nigeria (CIIN), Richard OlutayoBorokini and Prof Ade Ibiwoye, Head of Department, Actuarial Science and Insurance, University of Lagos (UNILAG).
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FBN General, Wapic Life get NAICOM’s nod on 2016 accounts
FBN General Insurance Limited and Wapic Life top the list of firms to get approval for their 2016 financial accounts.
This was made known in Lagos by the National Insurance Commission (NAICOM) in its Status Report of 2016 Financial Statements of Insurance Companies by March 8, 2017.
The report showed that 10 companies, including Wapic General; Ensure Insurance; Continental Re; Law Union and Rock; FBNInsurance; Consolidated Hallmark Insurance; Zenith General and Zenith Life Insurance submitted their results for the year.
NAICOM noted that Great Nigeria Insurance, NICON Insurance and Universal Insurance are yet to get approval for their 2015 accounts approved.
African Alliance Insurance, which has not been able to get approval for its 2015 accounts, was referred to the Financial Reporting Council (FRC).
It was stated that the 2015 accounts of Investment and Allied and Goldlink Insurance which are undergoing regulatory intervention are under review.
NAICOM had threatened insurance firms that fail to submit their financial accounts on or before June 30 will be restricted from engaging on some activities.
The commission said it would also take action against officials accountable for financial reporting as well as publicise the compliance status of insurance institutions on its website for public guidance.
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‘FBNInsurance committed to better service delivery’
DESPITE its over 2,000-man strong retail team, FBNInsurance Limited is increasing its investment in retailing to reach every part of the country, the Managing Director, Val Ojumah, has said.
Ojumah, who spoke at the company’s headquarters in Lagos, said this was part of the company’s strategic plans for the year.
He said the firm’s commitment to take insurance to the nooks and crannies of the country indicated its willingness to go the extra mile in providing affordable and responsive insurance to the hitherto uninsured.
He said: “Our strong presence in the retail space cannot be disputed. In spite of the number of insurance companies in Nigeria, we are yet to scratch the surface in terms of the potential of the market.
“As a company, we are looking to consolidate our retail presence, improve on our delivery time and achieve a most effective process for our key functions and deliveries.’’
On the company’s performance in the outgone year, he recalled it was a tough year, one in which inflation figures maintained double digits.
“Various reports have indicated an increase in claims settlement across the industry and massive job losses due to the economic meltdown, which further put a strain on industry. It is a tough time to do business in Nigeria. However, at FBNInsurance, we have kept to our philosophy of doing what we say. We think highly of our customers; come what may, we will always put them first.”
Head of Marketing and Corporate Communications, Elizabeth Agugoh, noted that the company in just six years of incorporation consistently delivered outstanding performance even in light of dwindling economic fortunes of the past two years.
This has been attributed to a strong heritage and an unwavering commitment to the provision of innovative, affordable and accessible insurance packages, she added.
FBNInsurance Limited, an FBNHoldings company, is associated with the Sanlam Group South Africa.
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FIRS taps Goldlink for tax compliance
The management of Goldlink Insurance Plc has received a team of the Federal Inland Revenue Service (FIRS) at its Head Office on a tax compliance visit, its Managing Director,Mrs. Funke Moore has said.
According to her, the visit was also to foster a better relationship that would ensure the underwriting firm’s continuous commitment to its tax responsibilities as required by the law.
While appreciating the FIRS support over time, Mrs. Moore assured the team of the company’s unwavering commitment in ensuring full compliance with tax laws and obligations.
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NAICOM, CBN strategise for bancassurance
The National Insurance Commission (NAICOM) and Central Bank of Nigeria (CBN) have begun work to reinstate the sale of insurance products in banks (bancassurance).
Bancassurance is a relationship in which insurance firms leverage customer base and network of banks to distribute their products to a large number of consumers to deepen insurance penetration.
In a statement in Lagos, NAICOM spokesman, Mr. Rasaaq Salami, he said the management of the NAICOM led by its Chief Executive, Alhaji Mohammed Kari, met with Central Bank of Nigeria (CBN) to discuss the issue.
Salami said the meeting was successful, adding that there were strong indications of positive resolution of all the grey areas. He stated that a Committee of NAICOM and CBN officials has been mandated to come up with a workable arrangement for the take-off of bancassurance.
According to him, the committee has one week from March 1, 2017 to conclude its arrangement. He noted that the Commission is excited that all the grey areas will be resolved.
NAICOM had ordered suspension of the sale of insurance products in banks in 2016 following a dispute with the apex bank over non-licensing of banks seeking bancassurance services.
As a result, NAICOM ordered the 58 insurance firms in the country to cancel any form of channels such as airlines, online or web-based aggregators, telecommunications and other platforms not approved by NAICOM, used to sell their products and services except the ones licensed by the commission.
The Commission also suspended such distribution channels it didn’t approve. Commissioner for Insurance, Mohammed Kari said the decision to suspend this programme was to ensure that transparency, ethics and compliance with set out rules in the transaction of insurance are followed. -
IEI gets shareholders’ nod to raise N13b
International Energy Insurance (IEI) Plc is set to recapitalise as it plans to raise N13 billion from the market, Interim chairman of the board, Mohammad Ahmad has said.
Ahmad, who was appointed on May 18, 2015, following regulatory intervention by the National Insurance Commission, made this known during the Company’s 42nd Annual General Meeting (AGM) held in Kano.
He said the development is as a result of the approval given the interim Board to recapitalise the company for growth and competitiveness.
According to him, the expected new capital when injected would enhance the firm’s working capital, improve IT infrastructure, meet solvency requirement as well as boost investment opportunities.
He said: “Rising from the Company’s 42nd Annual General Meeting (AGM) held in Kano, the shareholders approved that the directors in conjunction with the Technical Committee should further recapitalise the company by raising additional N9 billion, which when added to initial recapitalisation approval of N4 billion given at its 41st Annual General Meeting amounts to a total approval of N13 billion.
“The money, according to the approval, could be raised from the capital markets, local, or foreign investors whether by way of private placement, public or rights offer and or issuing ordinary and or preference shares of the company for such equity, whether by bonds , convertible loans or other debt instruments, with or without the option of converting such bonds, loans or other debt instruments to ordinary and or preference shares of the company or by debt equity conversion upon such terms and conditions as the directors may deem fit or determine, subject to all relevant approvals.
“Besides, the directors were also authorised to constitute a Technical Committee of the Board and Shareholders to renegotiate and restructure the company’s indebtedness to Daewoo Securities (Europe) Limited. The board has taken necessary actions to stabilise and ensure sound management and growth of the company.”
He hinted that the interim board has succeeded in getting approvals of the Company’s financial accounts up to date, assuring that 2016 accounts would be ready soon.
He also said the company has achieved risk underwriting, strengthened internal control, cost optimisation as well as implementing policies towards establishing good governance and industry best practice among others.
He assured shareholders that the board will ensure strong corporate governance and pursue measures to quickly return the company to profitability.
It is the responsibility of shareholders to ensure that the board that will take over from us comprise of honest people, and those you can trust. The interim board has no interest and does not represent any interest, he stated.
Timothy Adesiyan, a shareholder, said NAICOM’s intervention has saved the company from total collapse, urging the interim board to bring the firm to full stability before leaving.
Oyiwole Omishola, another shareholder also urged majority shareholders to consider the future of the company by giving their support to the interim board to enable them resuscitate and reposition the company for growth.