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Listed insurers in Africa’s most populous nation reported a climb in fourth quarter premium income, despite rising claims inflation, foreign exchange volatility, and constrained consumer spending.
Despite the economic downturn in the country, the insurance sector continues to be an economic driver and safeguard of national assets.
The most liquid and capitalised firms recorded a significant surge in premium volume, reaching an impressive N454.55 billion in 2023, according to data compiled by MoneyCentral.
This figure marks a substantial 35.38 percent increase compared to the N335.74 billion premium income recorded in 2022.
Leading the charge is AIICO Insurance Plc, whose gross premium written (GPW) was up 24.74 percent to N110.11 billion in December 2023, from N88.27 billion the previous year.
Custodian Investment Plc saw an increase by 16.42 percent to N86.31 billion in December 2023 from N74.13 billion the previous year.
AXA Mansard Plc GPW was up 25.90 percent to N86.84 billion in December 2023 from N68.98 billion as at December 2022.
NEM Insurance Plc GPW increased by 88.64 percent in the period under review from N33.36 billion the previous year.
Mutual Benefit Assurance Plc GPW rose by 33.15 percent to N44.57 billion in December 2023 from N33.48 billion as at December 2022.
Cornerstone Insurance Plc GPW grew by 27.61 percent to N30.62 billion in December 2023 from N24 billion the previous year.
The growth in industry premium income was largely or significantly driven by improvement in both life and non-life insurance segments, which validates the acceptability of market penetrating products that were being launched by entities seeking new opportunities in a fragmented market.
Structurally, the Nigerian insurance sector is categorised as Life insurance (13 companies), non-life insurance (27 companies), composite insurance offering both life and non-life services (13 companies) and Re-insurance (2 companies).
Of course, Compulsory Group Life Insurance (CGLI) added strength to life insurance premium, and analysts are sanguine of the continuous uptick in this segment on the back of growth in pension assets. A further analysis shows annuity business as the major driver of life premiums, due to the growing number of retirees taking up Annuity for Life policies as retirement benefits as permitted by Pension Reform Act of 2014.
The oil and gas insurance premium has maintained a steady uptick on the back of Local Content Policy, a policy aimed at increasing the proportion of oil and gas risk retained locally.
The Motor segment got a boost from a hike in premium rates for motor insurances.
The new directives by Federal Government, through the National Insurance Commission (NAICOM), stated that private vehicles that were paying N5,000 premium for N1 million Third Party Property Damage (TPPD) limit, are now to pay N15,000 premium for N3 million, while owner good vehicles are to pay N20 million premium for N5 million, and staff busses are to pay N20,000 premium for N3 million.
Sector players operate in a tough and unpredictable macroeconomic environment such as rising inflation that balloons the replacement costs of assets, foreign exchange crisis, and a huge energy costs that undermines profit margin.
Nigeria’s annual inflation rate continued to accelerate to hit a nearly 30-year high of 28.9 percent in December 2023, up from 28.2 percent in the prior month.
The International Monetary Fund has said Nigeria’s foreign reserves may fall to $24bn in 2024.
Despite the growth in premium, the Nigerian insurance industry continues to lag peers with low insurance penetration (Gross Premium Written/GDP) of 0.34 percent in 2019 (2018: 0.33 percent) compared with South Africa (13.4 percent), Morocco (3.9 percent), Kenya (2.3 percent) and Egypt (0.6 percent). Insurance density (Gross Premium Income per Capita) at $8.0 (2018:$6.2) also remains weak relative to peers such as South Africa ($803.0), Morocco ($127.0), Kenya ($43.0) and Egypt ($19.0).
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