Insurers bet on foreign partnerships to hedge rising competition
To cope with growing competition for business and regulatory compliance in the Nigerian insurance industry, companies are increasingly pitching their tent with foreign partnerships.
Besides funding, which is critically redefining the market space even ahead of anticipated capital increase in the industry, analysts believe that technical capacity, human resource, technology and high level corporate governance practice are other attractions.
And with visible improvements in the operation and compliance capabilities of local firms that were already in partnership with foreign firms, the wider market is compelled to sign deals with foreign partners.
BusinessDay investigations show that some big players in the market including AIICO Insurance Plc, Niger Insurance Plc and Royal Exchange Plc are major bets for foreign partnerships.
An industry source revealed that these companies have strongholds in the market and are likely to go along foreign partnerships to remain relevant and competitive.
However, the source said “the challenge some of them may have is being able to convince their major shareholders to let off some stake to accommodate new investors.”
Nigeria’s insurance industry has attracted an estimated $100 million equal to N36 billion fresh capital in the last six years, following entrants of global foreign equity investors, who are strategizing to take position in Africa’s most populous insurance market, for growth and development.
Allianz Group, a German world leading insurer and asset manager, with more than 86 million retail and corporate customers was the last to enter the Nigerian market with acquisition of 98 percent of Ensure Insurance Plc, a Nigerian based company, from its core shareholder, Greenoaks Global Holdings Ltd.
Ensure Insurance Plc offers life and non-life insurance services and generated 11 million euros in gross premiums written in 2016 financial year.
The transaction estimated at $35 million was expected to close at the end of 2017 when all necessary regulatory approvals would have been secured.
At the last count, global insurance companies including the likes Old Mutual, Metropolitan, Sanlam; Greenoaks; NSIA; Saham; AXA; Liberty, SUNU, SwissRe, and Prudential are already in Nigeria in different partnership arrangements, including acquisition.
According to analysts, growing foreign interest in the Nigerian insurance industry is raising the tempo of a sector formerly plagued by low activity and conservatism.
Richard Borokini, director general of the Chartered Insurance Institute of Nigeria, (CIIN) said local players efforts to get foreign partnerships is a welcome development in many areas.
“If it’s for international investment, it is good for the industry, if it is for economy it is also good, because they will bring funding for increased capacity, they will bring technology and expertise”.
Borokini noted that, for any company to have shown interest to get foreign partners, they would have thought of it and have a target. They may want to borrow experience, particularly with those firms that have become successful in other markets, Borokini noted.
“Because insurance is a global business, it’s good to relate with players in other advanced markets for exchange of ideas and information, the CIIN Boss stated.
Owolabi Salami, chief responsibility officer, Ensure Insurance Plc said most of the companies in the industry don’t have the underwriting capacity to retain larger proportions of the risks they write leading to outflow of premiums to the foreign markets.
According to him, global players have huge shareholders’ funds and very deep pockets and will help partner companies to retain more premiums.
On human capacity, he said there is a skill gap in underwriting of special risks such as Aviation, Engineering and Oil & Gas.
Global players have depth and experience in appraising such risks and will readily pass on the knowledge to the Nigerian underwriters, he said.
On the issue corporate governance, Salami stated that this is certainly one area that will receive a great deal of attention and positive impact. NAICOM will indeed be extremely happy at this development.
Salami also said that, the capacity of foreign companies to help improve product offerings where they have partnerships is enormous and would impact the market very positively.
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