According to the National Insurance Commission (NAICOM) in its latest report, Nigeria’s insurance sector’s total assets grew to N2.33 trillion in the fourth quarter of 2022.
The sector generated a total premium of N726.2 billion, representing 36.3 per cent growth quarter-on-quarter (QoQ) and 17.8 per cent year-on-year (YoY) in gross premium income According to the report, the assets figure represents positive growth that signifies expansion at the rate of 2.4 per cent, QoQ and 4.4 per cent YoY in the sector’s assets.
The market size distribution in terms of the sector’s total assets stood at N1.22 trillion, while the non-life insurance businesses stood at N1.12 trillion. The Non-Life business as in the prior periods, continued its dominance, contributing about 57.4 per cent relative to the share of the life business at 42.6 per cent.
In the report, NAICOM stated that the insurance claims recorded during the fourth quarter were N318.2 billion, an increase of 31.2% over the previous quarter.
The average premium that the entire insurance companies were able to retain locally stood at 71.3 per cent slightly a point lower than it held in the previous quarter and four points lower in comparison to the same period YoY. On a market basis, Car insurance maintained its lead as the highest retaining portfolio with a retention ratio of about 93.5%. While oil and gas recorded the lowest insurance retention rate in Nigeria with a 36 per cent premium retention in 2022.
Part of NAICOM’s report reads, “the oil and gas portfolio lamentably remained a challenging angle in the market owing to its nature of enormous capital and professional requirements.”
For a long while in the oil and gas sector, the insurance business has always been taken abroad by oil multinationals who prefer to use their captive firms in their home countries rather than using Nigerian insurers. But thanks to the Nigerian Oil and Gas Industry Content Development Act (NOGICD) of 2010, which initially required oil and gas business operators in Nigeria to ensure that local insurers insure at least 10 per cent of the risk and the rest taken abroad. This later increased to 45 per cent and then 70 per cent.
The act undoubtedly contributed immensely to the growth of indigenous insurance capacity in the Nigerian oil and gas industry. So from the 5 per cent insurance retention rate usually recorded in the past, the sector presently boasts 36 per cent. And the market is expected to benefit as high as 70 per cent from the act.
While these figures are commendable, looking at the insurance sector’s past state, several improvements still need to be made. The level of insurance penetration in Africa remains generally low and is one of the lowest insurance penetration rates in the world: less than 3%. On a country level, a country like Nigeria has a long way to go, especially when compared to its counterpart like South Africa.
In its 2022 insurance industry report, Augusto and co revealed that only 0.5% of Nigerians have insurance coverage. There are differing reports, but one thing that can be agreed upon is that Nigeria’s insurance penetration rate is still less than 1%. This is unsatisfactory when the over 200 million citizens the country boasts of being considered. South Africa on the other side with about 60 million citizens has an insurance penetration level of 13.7% as of 2020.
At the root of these failings are long-standing challenges of weak regulatory framework, lack of skilled personnel, weak risk management framework, lack of skilled personnel, inadequate access to information technology, and low standard of living amongst others.
Nigeria’s insurance industry is diverse, with insurance companies offering a range of insurance products and services, including life insurance, motor insurance, property insurance, marine insurance, and health insurance, among others. But with more than half of the population living below the poverty line, the idea of insurance is still unthinkable and a luxury to a significant number of Nigerians.
The importance of increased insurance penetration is crucial as it is essential for promoting financial protection, economic stability, risk management, job creation, and investment in the country. So Nigeria needs to do more to ensure increased coverage in the nearest future.