Recent research about insurance in Nigeria has revealed that the country’s insurance sector is projected to increase its penetration from the current 0.31 per cent to 3.69 per cent in the next 10 years.
The report released by Coronation Merchant Bank, indicated a number of factors including favourable capital importation, oil price, transactions in bonds and treasury bills, oil and equities will play significant roles in redefining the fortunes of the sector, which is currently hounded down by low capitalisation.
According to the report titled, “From the Lagoon to the Ocean: 2019 Nigerian Insurance Industry Report,” specifically threw its weight behind the recapitalisation directive by the National Insurance Commission [NAICOM].
The report likened the recapitalisation and other reforms to be implemented by June 2020 to the 2004 banking consolidation under the then Central Bank of Nigeria Governor, Prof. Charles Soludo, who ordered steep increase in banks’ capitalisation just as NAICOM is doing now.
This is as big as banking reform in 2004
So the insurance reform 2020 is very similar to banking reform 2004 under CBN Governor Prof. Charles Soludo. Governor Soludo ordered steep capital increases from the banks, just as NAICOM is doing now.
“Today Nigerian insurance customers are serviced by an under-capitalised and fragmented industry, offering a narrow range of products.
“In fact, when Coronation Research measured the inflation-adjusted change in industry-wide gross premiums over 10 years between 2008-2018, it found there had been no growth at all.
“And there was minimal growth in US dollar terms over the same period. For this reason we talk about the Nigerian insurance stuck in stagnant Lagoon, but with the prospect of an Ocean beyond.
“Doesn’t Nigeria need to get richer first?
The answer is ‘No’. This is the key finding of the Coronation Research report. Countries with the same GDP per capita have much higher insurance penetration rates (total gross premiums divided by GDP) than Nigeria.
“India, for example, has an insurance penetration rate of 3.69 per cent, compared with Nigeria with 0.31 per cent. This is the real opportunity – potential 10-fold expansion over eight to 10 years.
“Today we publish on Nigeria’s diverse insurance industry in the light of moves by its regulator to raise minimum capital requirements steeply,” the report noted.