There is a decline in the insurers’ retention capacity in oil and gas business.
The second quarter 2022 report of the National Insurance Commission (NAICOM) released at the weekend showed a decline from 42.3 per cent in oil and gas retention proportion to 40.1 per cent, a drop of 2.2 percentage points.
Besides, Nigerian insurers have not been able to retain the 70 per cent minimum capacity of the oil and gas business as required by the Local Content Act.
On claims settlement, the commission stated that the percentage of incurred claims as against claims reported mirror the market retention during the period.
The commission maintained that the performance in the oil and gas in terms of claims settlement had recorded some improvement compared to quarter two of the previous year, a sustained market development and growing confidence in the industry would improve the negative peculiarities and challenges of that section of the market.
NAICOM said the non-life insurers made progress in claims settlement as they recorded 85.7 per cent of claims settlement ratio, an increase of some 43 points compared to its position of 42.8 per cent recorded in the corresponding period of 2021.
Meanwhile, the motor insurance business retained its lead in claims payment as the non-life insurers posted a claims settlement ratio of 92 per cent out of N148.2 billion paid during the period under review.
The industry statistics for gross claims in Q2 of the year stood at N174.8 billion, representing 47.3 per cent of N369.2 billion premiums generated during the period.
The commission further said premium retention capacity operational confidence remained high despite the economic challenges in the financial system and the economy, as demonstrated by the retention positions in the sector.
Overall, the life business for the period retained 93 per cent while non-life recorded a ratio of 55 per cent as the industry average stood at 70.5 per cent.
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The commission said: “The retention in the non-life despite reporting an above average level, relative to its prior position of 59.4 per cent in the corresponding period of the preceding year, would require a focused attention for improvement as it declined by over four points representing eight per cent, year on year.
“Performance by various classes in the non-life segment of the market shows that all classes stood at an above average position except for the Oil and Gas business which was held a retention of 40.1 per cent.
“That points a decline in the Oil and Gas retention capacity in the market compared to the same period in 2021 when it recorded about 42.3 per cent in retention proportion”, the report read
Explaining the insurance claims component, NAICOM noted that the growth of the gross claims reported was 0.2 per cent during the quarter compared to the corresponding period of 2021.
“The industry statistics for gross claims in Q2 of 2022 stood at N174.8 billion, representing 47.3 per cent of all premiums generated during the period. This occasion reflects the professional underwriting capacity of the industry as driven by the intensified regulatory activities of the Commission.
“The net claims paid on the other hand stood at N148.2billion, signifying an 84.8 per cent of all gross claims reported during the period. The Life Insurance business recorded a near perfect point of about ninety 88.90 per cent claims settlement as against the reported claims while non-life segment stood at about 76.8 per cent.
“The percentage of incurred claims as against reported mirror the market retention view during the period. Motor Insurance retained its lead posting a claims settlement ratio of ninety-two per cent. Progress was however more noticeable in the Oil & Gas with an above 85.7 per cent of claims settlement ratio, an increase of some 43 points compared to its position of 42.8 per cent recorded in the corresponding period of 2021.
“Miscellaneous insurance also posted 61.9 per cent, higher than 44 percent paid claims ratio, compared to its corresponding period of 2021. While General Accident stood at 75 per cent, Fire 76.2 per cent and, Aviation and Marine 61.9 per cent followed in that order”, the commission added.