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Virus, EndSars Woes Hit Nigerian Insurers Facing Surging Claims Expense

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The largest listed insurers in Africa’s largest economy are facing mounting obligations to policyholders brought on by the destruction of properties during the EndSARs protests and the Covid-19 crisis.

“Covid-19 will have an impact on Life business. And l know that the Fire and Motor can be attributed to the EndSaRs protests,” said Monsuru Moronfola, actuarial scientist with Coronation Insurance Plc.

For the first nine months through September 2020, the largest insurers quoted on the bourse collectively incurred N98.37 billion in claims, that represents a 31.12 percent jump from 2019’s N75.30 billion; and is the largest expansion in five years.

Their average loss ratio otherwise known as claims ratio increased to 48.45 percent in September 2020 from 45.12 percent the previous year, according to MoneyCentral calculations.

More dismal figures are expected once damages from EndSARs protests that began in October are factored in at Full Year.

A breakdown of the 9 months’ figures shows combined claims in the Life segment increased by 16.96 percent to N46.96 billion in the period under review from N40.15 billion the previous year, while Non-Life spiked by 25.56 percent to N31.57 billion in the period under review as against N25.14 billion the previous year.

Drilling down into the numbers further shows insurers collectively incurred N2.03 billion in obligations to the Fire business or segment, as at September 2020, from N1.37 billion the previous year.

There were also mounting obligations in the Accident segment, as claims spiked by 34.26 percent to N1.44 billion in the period under review from N1.07 billion the previous year, according to data gathered by MoneyCentral.

However, there was a reduction in claims in the oil and gas segment by 61.61 percent to N2.13 billion as at September 2020, as the sudden drop in crude oil price due to the coronavirus pandemic that disrupted the economy across the globe soured that line of business.

Analysts say the insurance Nigerian industry will be further exposed to huge claims following the disruption of properties as hoodlums hijacked the EndSARS protests that were initially peaceful.

For example, in locations like Surulere, a middle class suburb of Lagos, almost every shop, bank, shopping mall and ATM gallery along Bode Thomas and Adeniran Ogunsanya streets were damaged and goods carted away freely and there were reports of similar incidences in other parts of Lagos and in other states.

There were also reports of BRT buses burnt at terminals and buildings razed down by fire. The Lagos State governor Babajide Sanwo-Olu was reported to have said the state alone would need N1 trillion for reconstruction after the destruction caused by the hoodlums.

Insurers had estimated they would have to pay billions of Naira to policyholders whose properties were vandalized and destroyed during the bedlam that also resulted in loss of lives.

On November 5, Ganiyu Musa, Acting Chairman, Nigerian Insurers Association (NIA), and Group Managing Director, Cornerstone Insurance Plc, had said that the Association’s loss Adjusters were already on sites and trying to come up with estimates of some of the facilities damaged during the #EndSARS riot and to also determine the level of claims.

Insurers are also exposed to spiraling claims due to the coronavirus pandemic that forced the government to impose a lockdown policy that resulted in business interruptions as airlines were grounded to a halt while events were cancelled.

Analysts at PWC in a recent report on the Insurance Industry warned that the virus would lead to a surge in health, travel and business interruptions, supply chain and event cancellation claims.

“There is possibility of regulators asking for extraordinary solvency tests to ensure insurers can withstand the immediate and knock-on impacts,” said the analysts.

Broader fallouts from the pandemic in terms of lower demand and investment returns, a significant deterioration in the credit quality of fixed income securities and increased mortality rates from the virus could pressure earnings, reserves and profitability of the life insurance sector in 2020.

Additionally, a rise in COVID-19 related claims, premium rebates and lower interest rates could affect non-life.

The surge in claims liabilities from the EndSARs protests and the virus related headwinds is a double whammy for an industry reeling from deteriorating underwriting conditions.

Insurers won’t find succor in the ultra-low yields environment either, which has damped investment income, meaning companies will see a sharp reduction in profitability, and shareholders’ dividend will be under pressure.

Mounting claims expenses are also threatening the existence of some insurers who have seen their combined ratios jump above the 100 percent threshold.

For instance, Niger Insurance total claims expenses of N935.68 million as at September 2020 is 1.34 times net premium income of N697.26 million, according to MoneyCentral calculations. The insurer made a loss of N613.86 million.

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