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Insurers have remained resilient despite high inflation, rising cost of energy and foreign exchange (FX) shortages as they continue to use innovative products which satisfies customers’ need to magnify their revenue.
Premium growth has been accelerating as rising risk awareness is demanding the need for more insurance protection, but there are increasing concerns about penetration rate.
The largest listed and most liquid insurers in Africa’s most populous nation collectively realised N314.29 billion in gross premium written (GPW) as of June 2023, which is 26.98 percent higher than 2022’s N247.51 billion, according to data gathered by MoneyCentral.
They collectively generated N224.33 billion in gross premium income (GPI) as at June 2023, which is 18.13 percent higher than 2022’s N189.88 billion as at June 2022.
Their combined net premium income (NPI) rose by 19.57 percent to N128.95 billion as at June 2023, according to data gathered by MoneyCentral.
There has been improvement on the back of the proposed recapitalisation scheme of the regulator, expansion of distribution channels and prompt claims payment, among others.
Technological innovation in product distribution induced by the pandemic, an increasing awareness of the benefits of insurance, are some of the premium income growth drivers in the period under review.
The motor business got a boost from a hike in third party motor insurance while the oil and gas segment that is the largest driver of overall revenue remain upbeat on the back of Local Content policy.
Annuity business remains the major driver of life premiums, due to the growing number of retirement benefits as permitted by the Pension Reform Act 2014.
The significant growth in revenue is amid an economic downturn as the unification of the exchange rate to spur foreign investment aggravated inflationary pressures and gyrations in the foreign exchange market.
Whenever inflation rises, insurers face mounting obligations due to higher cost of replacement of assets that results in inefficient underwriting results as the combined ratio gets bloated or spike.
Nigeria’s inflation surged to 24.08 percent in the month of July 2023, a 129 basis-point increase compared to 22.79 percent recorded in the previous month.
“Perennial power outages, herders and farmers conflicts, kidnapping, banditry poor infrastructural facilities, increasing poverty, galloping inflation, flooding, and other natural catastrophes.“Also, geometric rise in the exchange rate of the business resulting in high cost of operations,” said Olusegun Omosehin, chairman, Nigerian Insurers Association (NIA).
“Notwithstanding these challenges, insurance companies continue to discharge their obligations as financial intermediation and restorer of businesses in line with their mandate,” said Omosehin.