Lagos, Nigeria – Chief Executive Officer of the Nigerian Stock Exchange, Mr. Oscar Onyema (OON), has revealed that many licensed insurers are largely undercapitalized, thus limiting their ability to take on big ticket in-country risks, as is often required in the oil & gas, marine and aviation sectors.

He further disclosed that as the third quarter of 2019, the insurance sector contributed less than 1% to the Gross Domestic Product (GDP) of Nigeria.

Onyema made these disclosures in his welcome address at the Insurance Sector Forum held during week at the Nigerian Stock Exchange (NSE).

The forum is part of the strategic efforts towards supporting the insurance sector by the NSE, especially at the pivotal time of recapitalization consequent upon the upward review of the minimum paid-up share capital requirement of insurance and reinsurance companies by the National Insurance Commission (NAICOM)

“Many licensed insurers are largely undercapitalized, thus limiting their ability to take on big ticket in-country risks, as is often required in the oil & gas, marine and aviation sectors. As at Q3 2019, the insurance sector contributed less than 1% to the Gross Domestic Product (GDP) of Nigeria”, Onyema said at the forum.

He said the ongoing recapitalization and consolidation exercise is expected to “significantly impact the industry and equally present new opportunities in M&A as well as private equity and public offerings”. 

However, he also said that the Nigerian Insurance industry has grown remarkably over the years, generating a Gross Premium Income (GPI) of ₦448.6 billion in 2018, reflecting a 12% growth from 2017.

“The industry also recorded an increase in its asset base by an estimated sum of ₦1.3 trillion as at December 31, 2018, reflecting a 17% Compound Annual Growth Rate over the last three years”.

Citing the National Bureau of Statistics, Onyema said the Insurance sector recorded “a nominal growth rate of 6.69% and a real GDP growth rate of 3.96% in Q3 2019 from 4.48% in Q2 2019 and 1.03% in Q3 2018”.

While this data indicates a positive outlook in the Nigerian insurance industry, the reality and headwinds faced by operators in the sector are quite formidable. “Having a penetration rate of 0.31% and an insurance density of 6.2%, the Nigerian Insurance Industry still lag behind its African counterparts – with South Africa having a penetration rate of 14.7%, Kenya 2.8%, Ghana 1.1% and Egypt 0.6%.

The CEO said the insurance industry presents perhaps “the most remarkable investment case of any industry in Nigeria and despite present challenges; it presents numerous opportunities for enhancing the economic fortunes of this country.

“Foreign investors, recognizing these opportunities have acted accordingly with the likes of AXA, Prudential, Liberty, Swiss Re, SUNU Group, Saham Group, taking strategic positions in the industry.

“An estimated capital of ₦200billion is expected to be injected into the Nigerian insurance industry post-recapitalization with a 400% increase in the minimum capital required for life, 333% for non-life, 360% for composite and 200% for re-insurance”, adding that “this directive by the industry regulator would enhance performance, bring about efficiency, innovation and profitability, the industry needs significant support to unleash its growth potential”.

Oscar Onyema said the NSE will continue to “encourage the Insurance operators by providing a special window to fast-track the approval process, provided the operators have demonstrated high standards of corporate governance, deep social impact, high regulatory compliance and enhanced returns for their shareholders”, noting that the NSE looks “forward to having our first insurance company listed on the Premium Board of the NSE”.