Indigenous insurance companies that fail to recognise the changing dynamics of the industry following the influx of innovative foreign insurers would find themselves having to play catch-up in the near future to remain relevant.
Analysts say the in-coming foreign investors are introducing visible change into the market, by way of experience, governance, product innovation, human capital development, skills acquisition and compliance.
Analysts say indigenous companies, which fail to upscale their game, would therefore be left behind when the impact of the foreign players starts to show in their performance.
Sunday Thomas, deputy commissioner for Insurance, Technical, National Insurance Commission (NAICOM), says the foreign insurers who have come into the market are taking their time to understudy the landscape before they launch out.
“We listened to them when they were coming in, and they laid out a plan which we are following,” Thomas says, saying further, “They are building skills and training our people to suit their standard, and I have no doubt that it will impact on their performance in the near future.”
He further observes that the presence of the foreign players will impact on the overall operations of the industry and that indigenous firms will be challenged to measure up.
Margaret Dawes, executive director, Sanlam Emerging Markets (SEM), says the coming in of foreign insurers into the Nigerian market is a threat to local insurers, as the foreign insurance companies usually have bigger balance sheets and cash in hand, in hard currency.
Dawes says, however, that it is also an opportunity for local insurers to partner with the foreign players who in addition to the financial aspect, bring their technical expertise, sometimes international client connections and best practice.
“The reality is we live in a global economy and an international partner is going to give a local insurer access to those markets – probably on a bigger scale than if it was just an indigenous player. If you look at the Nigerian economy growing, the general insurance requirements for example, for infrastructure development projects, are going to be huge and I think the opportunities to participate will be bigger if you have international connections.
“Furthermore, the move to a Solvency 2 regime by the regulator, is going to require more capital for many insurers. This presents an opportunity to partner with foreign insurers.
“Overall, I think that the entry of foreign insurance companies should be good for the market, as they will bring overall growth, skills and capital, she says.
Dawes however tasks the local players to keep up to date with what is happening outside of Nigeria, as ultimately, it will be relevant to Nigeria. “Digital technology is going to be extremely important. The solvency regime is going to change – be prepared, it can be onerous,” she states.
Desmond Afolabi, analysts with one of the newly acquired insurance companies, says, “we anticipate improved underwriting capacity. Most of the companies in the industry don’t have the underwriting capacity to retain larger proportions of the risks they write, resulting in outflow of premiums to the foreign markets.”
Afolabi observes that, foreign insurers have the capacity to deploy greater capital to their Nigerian subsidiaries, thus increasing the ability to retain more premiums by the Nigerian businesses.
“Nigerians will experience a massive improvement in the quality of service they currently get from the insurance industry because these companies will introduce global best practices.
“Corporate governance is certainly one area that will receive a great deal of attention and positive impact, and NAICOM will indeed be extremely happy at this development.”
Mohammed Kari, commissioner for Insurance, says the Nigerian development plan vision 2020 described the Nigeria insurance sector as a ‘gross untapped opportunity’ with low market penetration.
According to Kari, the foreign investors, having noted these great opportunities are attracted by the huge potential in the Nigerian insurance space.
“These investors are ready to position themselves for the future; hence the likes of Axa, Prudential, Liberty, Swiss RE, Sunu Group, Saham, and Allianz have taken positions in the industry and in partnership with indigenous companies for development and growth.
Kari further states that we have had three foreign acquisitions into the sector in 2014, two in 2015, five in 2016 and that many more are coming.
He however states that the growth of the Nigerian insurance industry is hinged on right products, innovation, prompt claims payment and healthy competition between local players and their foreign counterparts.