Time was when the insurance sector was considered a hard sell. But today, it is becoming a big attraction for local and foreign investors who are desirous of maximising the gains and opportunities offered by the sector compared to other high risk investments.
To many economic watchers, this is indeed a very wonderful development and positive signs that things would begin to happen in a sector that used to be considered a hard sell.
Ripples Nigeria gathered that Nigeria’s insurance sector has over the last three years remained the toast of potential foreign investors. Consequently, the sector in 2015 witnessed an influx of foreign players who deemed the market the best to play in, especially at a period of economic crunch fueled in part by the dwindling oil receipts.
The country is endowed with a huge population in excess of 170 million, high rate of urban population and emerging middle-class which the sector continues to explore, these among others has made the sector attractive to investors, especially high portfolio global insurers over the last three years.
In a report by the National Insurance Commission (NAICOM) a number of new entrants especially foreign investors came into the sector last year. Among the newcomers include: Liberty Group of South Africa and Prudential Life Company of UK.
Upbeat, the former Commissioner for Insurance, Fola Daniel at a public forum recently observed that the Nigerian insurance industry was becoming so popular not only in Nigeria but across Africa that it has occupied the second position in Africa from the fifth position it occupied between 2012 and 2013.
Also Foreign Direct Investment (FDI) attracted by the insurance sector in the last one year was estimated at about $750 million.
The major driver behind the significant investment is traceable to the decision by the Central Bank of Nigeria (CBN) to reverse universal banking licenses, which forced banks to divest insurance subsidiaries.
In August 2010, the CBN directed banks under its supervision to divest from their subsidiaries including insurance companies to enable them concentrate on their core banking business.
Findings by Ripples Nigeria showed that most of the leading global insurance companies have either acquired or bought substantial equity of some Nigerian insurance firms in the last six months, a move experts say is strategic given the growing middle class.
A breakdown of the acquisitions showed that South Africa’s giant, Old Mutual, took over Oceanic Insurance, Sanlam Insurance bought FBN Life Assurance, NSIA Participations took over ADIC Insurance and Greenoaks Global Holdings acquired Union Assurance.
It may be recalled that only recently, France’s Axa announced that it had acquired a 77 per cent interest in Mansard Insurance, formerly GTAssurance, for €198million.
Analysts at FBN Capital stressed that global underwriters are trooping to Nigeria because of the positive demographics and rising household incomes across Africa, sometimes dressed up as the emergence of the middle class.
“The new national accounts with a base year of 2010 were helpful in this respect. The same investment rationale can be applied to banks, retail, telecoms, and consumer goods manufacturing and advertising,” they said.
A report by NAICOM also showed that the sector recorded a total of N258billion in gross premium income for 2013 and expects N1trillion for 2018.
But experts in the sector were of the view that the entrance of these icons will engender healthy competition within the industry which will in turn promote growth.
According to NAICOM, the development will also assist the government to tackle unemployment challenges in the country.
As at the end of first quarter, 2015, the Nigerian insurance industry total asset has risen to N793.6 billion while the total premium as at the end of 2014 according to NAICOM stood at N302billion.
The sector in the same first quarter of 2015 recorded gross premium income to the tune of N97.017billion compared to the N302.105billion written in the whole of 2014, thus positioning the sector for further growth.
This figure indicates a growth rate of about 28 per cent considering the average N75.5billion quarterly premium recorded in 2014.
In 2015, NAICOM inaugurated fourteen insurance companies to operate the Technical Management Board of the Energy and Allied Risks Insurance Pool of Nigeria (EAIPN).
The companies include: Leadway Assurance Company limited, Custodian & Allied Insurance Plc, Aiico Insurance Plc, Lasaco Assurance Plc, Royal Exchange Insurance Co. Ltd, Consolidated Hallmark Insurance Plc, and Sovereign Trust Insurance Plc.
Others are Linkage Assurance Plc, Industrial And General Insurance Plc, Nigerian Agric Insurance Corporation (NAIC), Sterling Assurance Company Limited, Prestige Assurance Plc, NEM Insurance Plc and NSIA Insurance.
Before the period also, companies including Old Mutual, NSIA, Metropolitan Life, Sanlam, Greenoaks and AXA have established their presence in Nigeria through acquisition and partnerships, and this analysts believe have started recording significant impact on the market.
Group NSIA, a company based in Abidjan, Cote d’Ivoire, bought 96.15 per cent equity of Diamond Bank Plc in ADIC Insurance Company Limited.
Sanlam Emerging Markets, a group of South Africa-based investors, bought 35 per cent stake in FBN Life Assurance Limited with First Bank of Nigeria Plc owning the remaining 65 per cent among others.
On the merger side, Custodian and Allied Insurance Plc have merged with Crusader (Nigeria) Plc having secured the nod of their shareholders through the court, while FBN Life recently concluded acquisition of Oasis Insurance, now, FBN Insurance, underwriting both life and non life business.
Experts hinged the growth of insurance industry to right product, innovation and healthy competition between local players and their foreign counterparts. Thus they are optimistic that the presence of foreign insurers in the Nigerian market would in no distant time impact on penetration and service delivery.
The former President, CIIN and chairman, Insurance Industry Consultative Forum, Bola Temowo, stated that the industry was poised at addressing many of the challenges facing the sector in order to sustain current development in the market that has attracted the attention of many foreign investors.
The development no doubt, is a welcome change which many analyst say will improve business fortunes in the country, given the effects the dwindling revenue on crude oil has had so far on the country’s economic fortunes.
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