Insurance Sector Grows GPI to N448.6bn in 2018, Says Onyema
UMORU ABDULKADIR
The Chief Executive Officer (CEO) of the Nigerian Stock Exchange (NSE), Oscar Onyema Tuesday said that the insurance industry has grown remarkably over the years, generating a Gross Premium Income (GPI) of ₦448.6 billion in 2018, reflecting a 12 per cent growth from 2017.
Onyema said 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 per cent Compound Annual Growth Rate over the last three years, according to him.
He stated this at an Interactive Forum with Insurance Sector stakeholders held at the NSE’s office in Lagos on today.
“According to the National Bureau of Statistics (NBS), the Insurance sector recorded a nominal growth rate of 6.69 per cent and a real GDP growth rate of 3.96 per cent in Q3 2019 from 4.48 per cent in Q2 2019 and 1.03 per cent in Q3 2018.
“Although this data indicates a positive outlook in the Nigerian insurance industry, the reality and headwinds faced by operators in the sector are quite formidable.
“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,” the NSE CEO stated.
Onyema said due to the challenges facing the sector, the insurance industry only contributed less than 1 per cent to the Gross Domestic Product (GDP) of Nigeria as at Q3 2019.
Stressing the need to have a more stable and resilient insurance sector, the NSE chief said, the ongoing recapitalisation exercise by insurance companies in the country would make the sector stronger by attracting an estimated sum of N200 billion to the sector.
However, he lamented that despite the progress recorded by the sector across some metrics, it still lags behind some other African countries’ with comparative fundamentals in terms of penetration and density.
He recalled that the National Insurance Commission (NAICOM) recently announced the upward review of the minimum paid-up share capital requirement of insurance and reinsurance companies, adding that it would help improve the sector.
He said “An estimated capital of ₦200 billion is expected to be injected into the Nigerian insurance industry post-recapitalization with a 400 per cent increase in the minimum capital required for life, 333 per cent for non-life, 360 per cent for composite and 200 per cent for re-insurance.
“While I am optimistic 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.”
He noted that the recapitalization and consolidation exercise is expected to significantly impact the industry and equally present new opportunities in mergers and acquisitions (M&A) as well as private equity and public offerings.
Speaking further, he added that with a penetration rate of 0.31 per cent and an insurance density of 6.2 per cent, the sector still lags behind its African counterparts, such as South Africa with a penetration rate of 14.7 per cent, Kenya 2.8 per cent, Ghana 1.1 per cent and Egypt 0.6 per cent.
He stated that despite the myriads of challenges facing the sector, there are many opportunities in the sector, which he said some foreign investors have already recognized and tapped into by acting accordingly with the likes of AXA, Prudential, Liberty, Swiss Re, SUNU Group, Saham Group, taking strategic positions in the industry.
“At the NSE, we see close parallels between this recapitalisation and that of the banking sector in 2005.
“The immense growth seen in banking industry in large part can be attributed to successful capital raised through the capital market.
“The crucial question before us is unraveling how to replicate similar successes within the insurance space and leverage the platform of The Exchange to successfully raise rightsized capital to fuel accelerated growth,” he said.
He said the nation’s equities market provides a platform to support listed corporates to meet their business objectives whilst also implementing strategic initiatives that have improved investors’ confidence.
“This has allowed listed companies to be positioned on the Exchange as attractive investment opportunities.
“We have worked assiduously over the years in ensuring positive impact to the private sector and more importantly our listed companies through policy advocacy and strategy execution efforts.”
On tax exemptions for the industry, he said The NSE would continues to engage the Federal Government on tax incentives for listed companies and exemption relating to investments in the capital market.
“We are delighted to note that we have made some strides in our discussions, some of which are evident in the proposed amendments to The Finance Bill 2019, which has now been passed by both Houses of the National Assembly.”
Onyema promised that with the ongoing recapitalization exercise, the NSE would encourage insurance operators by providing a special window to fast-track the approval process as long as the operators demonstrate high standards of corporate governance, deep social impact, high regulatory compliance, and enhanced returns for their shareholders.
Quite optimistic, he said; “Post recapitalization, we look forward to having our first insurance company listed on the Premium Board of the NSE.”
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