The Nigerian insurance industry has remained resilient despite challenges in the economy, according to a report by Agusto& Co. Limited.
Agusto & Co., a pan-African credit rating agency and business information provider, said this in its 2022 insurance industry report titled ‘The Nigerian insurance industry – More resilient than expected despite headwinds’.
The report showed a review of the insurance landscape in Nigeria and the near-term expectation for the industry.
It said despite the lockdown, which emanated from COVID-19 and further losses from #EndSARS protests, the industry recorded improved performance.
It said, “In the financial year ended 31 December 2020, the Nigerian insurance industry generated an estimated gross premium income of N520.1bn ($1.4bn at N380/$), with growth muted by the outbreak of the COVID-19 pandemic.
“The lockdown following the COVID-19 pandemic negatively impacted insurance products distribution, especially with the inter-state travel bans restricting the movement of people and goods.
“Simultaneously, in the financial year 2020, the industry paid out net claims of N196bn, up by 20 per cent year-on-year (representing 37.6 per cent of GPI) and worsened by the violence that trailed the #EndSARS protest in October 2020.”
It said modest profitability indices were expected in the fiscal year 2021 and to a lesser extent in FY 2022 due to higher claims, an aftermath of the protests as well as inflationary pressures on the industry.
It said, “Nevertheless, Agusto & Co. notes that the violence that trailed the #EndSARS protest has also emphasised the importance of insurance products, particularly with the absence of a robust social security system in Nigeria.
“The violence that trailed the protest could be a catalyst for insurance uptake in the near term, given that the insurance penetration rate has remained less than one per cent in Nigeria.”
Agusto & Co. also expects a resumption of the recapitalisation exercise in the short term.
The rating agency said the persistent naira devaluation had reduced the financial strength of the industry’s capital since the last recapitalisation exercise in 2007.
Although some insurers have strengthened their capital base through earnings retention, the ability of most industry operators to solely underwrite large ticket transactions has dwindled based on the lower value of capital in USD terms, it added.
