Reinsurance gap opens door for new operator
by Modestus Anaesoronye
November 9, 2017 | 1:45 am| | | Start Conversation
The reinsurance capacity in Nigeria may soon receive a boost, if plans to secure a new license from the industry regulator, the National Insurance Commission (NAICOM) by a group of investors scale through.
For now, there are only two licensed reinsurance firms operating in the country: Nigeria Reinsurance Corporation (Nig Re) and Continental Reinsurance Plc, whose share of the market is still insignificant given available risks.
BusinessDay gathered that there are ongoing consultations to float a new reinsurance company that will not only focus on the Nigerian market but also other African countries, as a way of taking advantage of the opportunities available in the continent.
According to sources, the discussion is being led by senior chieftains in the industry, who are said to be looking for other investors across the African market for better spread.
“They have the money to put down, but I think they want to get investors from insurance companies around Africa that can also support them with businesses,” said an industry chief who doesn’t want his name mentioned.
The retention of a low percentage of insurable risks emanating from the local market is a symptom the significant shortage of reinsurance capacity in the Nigerian insurance market.
The two reinsurers Nigeria Reinsurance Corporation (Nig Re) and Continental Reinsurance Plc, cumulatively had as at the end of 2016 gross written premium of N24 billion and about N50 billion in total assets.
At the moment, over 70 percent of the risks generated locally are reinsured abroad with highly capitalized firms in United States of America and Europe, undermining government’s efforts at promoting local content policy.
This challenge is worse in oil and gas, and aviation risks where claims of a major disaster could wipe out the balance sheets of the whole industry.
Isioma Chukwuma, managing director/CEO, Nigeria Re had told BusinessDay during an interview that “we do not have the needed capacity to retain the risks that are generated here in Nigeria.”
According to her, the insurance industry is losing a lot of premium to the offshore market, whereas some of this premium could be retained here if the sector grows in size and improves capacity.
She noted that the National Insurance Commission (NAICOM) is committed to helping the industry on this, “they have actually issued out circulars to the market but then, companies are not complying to that circular, so what we are having is lack of compliance.
“Yes, circulars have gone out but how to ensure it is strictly adhered to is the challenge we are facing,” Chukwuma observed.
Sina Elusakin, an insurance expert said while it is true that Nigeria is losing a lot of money on premium flight for lack of capacity, the industry must be cautious about it.
Elusakin said insurance is a very delicate business because only one risk in oil and gas or aviation could close a market if disaster happens.
“That is why I think we should revalue our capacity from time to time to be able to know the level of risks to carry in our portfolio.”
Big Read |