The Nigeria insurance industry can only witness significant growth when there is a constant collaboration on the part of regulatory authorities.
This was the view of a current report on, ‘Nigerian Insurance Industry: From the Lagoon to the Ocean’, by the Research Department of Coronation Merchant Bank. The National Insurance Commission, (NAICOM), recently, set new recapitalisation requirements due in June 2020, for all insurance businesses in Nigeria, except for takaful and micro-insurance.
With most insurance companies battling to meet up the new capital requirement, the Head, Coronation Research, Guy Czartoryski, noted that to unlock the potential and position the insurance industry for radical growth, cooperation between regulators; NAICOM, Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC), as well as distribution partnerships with banks and telecom companies is critical.
Czartoryski stated that the injection of fresh capital was necessary for development, but a fresh strategic approach is essential to reach the industry’s potential.
He said “due to NAICOM directive, we believe the number of insurance companies would decrease from the current 59 companies to around 25. There are close parallels with the banking reform of 2004. The banking industry grew rapidly after that; so, the question is how the insurance industry can grow after 2020. In the meantime, there will be capital raising and mergers and acquisitions.”
Giving insight on how the insurance industry will be transformed beyond 2020, he stated that the sector presents perhaps the most remarkable investment case of any industry in Nigeria. At one level, the business case is very simple.
He said, “Insurance penetration, at 0.31 per cent, is extremely low, even compared with countries with similar GDP per capita, for instance India with insurance penetration at 3.69 per cent. Experience in other countries shows that, in the right conditions, insurance can be rolled out to India’s level in eight to 10 years. This means Nigeria could grow from 0.31 per cent penetration to 3.69 cent penetration in 10 years.”
He further acknowledged that the insurance industry is lagging behind in growth due to conditions which have not been helpful.