Stakeholders in the insurance industry are of the view that the successful implementation of the risk-based supervision-solvency 11 can help spur insurance industry to growth.
“It will give you the type of risk profile you want. It will help you to decide and carry out activities to insure product,” said Thierry Mibimi, partner and head, Financial Risk Management, KPMG, during the 2017 Wapic Insurance Annual Summit held in Lagos.
“If your excess capital is zero or negative, you are stressed and that means you do not have capital solution to cover your unexpected losses,” Mibimi said.
Stakeholders at the summit identified the objective of the new regime in Nigeria to include firstly, the implementation of an embedded and holistic and proportionate and regime for (re) insurance firms and group.
Secondly, to apply an appropriate risk base supervisory process that will facilitate efficiency and effectiveness of the system.
Thirdly, to enable firms have a financial reporting practices that will meet and information needs of all relevant stakeholders, especially policyholders.
“The main aim of solvency 11 is to shore up the capital base of insurers,” said Jurgens Kroon, Africa Business Analytics.
Experts therefore urged National Insurance Commission (NAICOM) to borrow a leaf from the central bank as regards the implementation of the minimum capital adequacy computation under the Basel 11 rules.
The insurance industry is in need of reforms that will position them for growth give their slim assets base compare to their foreign counterparts.
The third quarter 2016 cumulative gross premium written (GPW) of NSE Insurance 15 index, compromising 15 of the most liquid insurers, stood at N117.51 billion, which is lower than the African’s Re’s GPW of N201.15 billion
NSE 15 insurance index total asset in the same period was N396.45 billion, lower than African Re’s of N419.21 billion.
Insurers in Africa’s most populous nation have been grappling with a myriad of challenges like an economic downturn that saw the country slip into its first recession in 25 years.
Also, lack of skilled staff that understand the technicality of the business, obsolete technology and cultural and superstitious belief that taking a cover is a premonition of one’s death, leaves the sector fragmented and growth stunted.
These challenges make the country’s market underdeveloped and fragmented despite its huge population.
According a recent report by KPMG on the insurance sector, there are 32 non-life insurers, 17 life insurers, and 10 mixed companies catering for a total market of $1.6 billion (N320bn).
The aforementioned figures are abysmal when compared with South Africa, the continent most developed economy that has 179 insurance companies, but it serves the market of $51.6 billion (N10.2trn).
The average company size is also more than 10 times bigger than Nigeria, according to the report.
The insurance industry grew 1.1 percent in the fourth quarter versus 5.1 percent year on year, according the National Bureau of Statistics (NBS). The economy shrank for a fourth consecutive quarter in the three months through December and contracted 1.5 percent for the whole year, NBS said.
“Industries are shrinking and we don’t have need firms coming in instead they are lying off. It will affect us because we are tied to the system,” said Owolabi Salami Chief Responsibility Officer Ensure Insurance.