The Federal Government
(FG) has promised to provide the enabling environment for the growth of the
nation’s insurance industry, reports ITRealms.
The Minister of Finance,
Mrs. Kemi Adeosun gave this assurance in her remarks to the National
Insurance Conference in Abuja, saying that the current administration would
lead in the reforms of a more vibrant Nigeria insurance market.
She explained that a
developed and active insurance market would bring about increase in the nation’s
Gross Domestic Product (GDP), accumulation of long-term funds for
infrastructural financing, job creation, and an improved standard of living.
She added that the
development would also attract foreign investment into our country.
Dwelling on the ongoing
efforts of industry stakeholders to reposition the insurance industry for
growth, the Minister said the Federal Government was ready to lend its support,
saying “There is a need to immediately address the decline in the Nigerian
Insurance Industry as it is lagging behind global and African peers. Despite
being the largest economy in Africa, the Nigerian insurance industry remains
largely underdeveloped. The industry has under-performed the Banking sector and
even the recently established Pensions sector."
Emphasising the resolve
of the Federal Government to stimulate extra-ordinary growth and unleash the
potential of the insurance industry in Nigeria, the Minister listed some
factors necessary for the change. These, among others include the needs to:
"Recognise our true
stage of development- we are an industry that despite its age remains in its
infancy. This means that Government must act as a nurturer and incubator of the
industry. We have also seen the success of the pension fund industry as a text
book example of where government policy set clear parameters for participation,
led by example and enforced legal obligations.
"If we are to use the Pension
fund success story as a template for the Insurance Industry, then we can
jointly identify the required road map."
She also stressed the
need to strengthen the capital base of insurance companies.
She recalled that in
1981, the minimum capital requirement for banks was N1million while that of
composite insurance companies was N0.8 million. By 2014 Banks had grown theirs
to N25 billion and Composite Insurance Companies to N5 billion showing that
Banks had grown capital requirements 8x faster. The industry needs to
recapitalise. Capital levels were last raised in 2007. To take true advantage
of the opportunity for the industry we must recapitalise and reposition. The
top 3 banks have capital in excess of N300 billion each! The top 3 insurers
have capital of between N14 billion to N25 billion.
"The insurance
sector needs to raise minimum capital requirements in a manner that is
comparative to what happened to the banking sector in the last two to three
decades. Increased capital will provide funding for publicity and product
development. It will raise the clout of insurance companies in policy
formulation and will enhance our capacity to hire the best people and deploy
the technology and marketing, product awareness and investment needed to
support the industry.”
According to her, the
current administration firmly believes that the economy has only one direction
to move in and that is upwards as true change means doing things differently
with the full expectation of different outcomes. “Our confidence in the future
of our economy is not based on the statistics that have consistently detailed
its potential but rather the deliberate policies and actions that will ensure a
robust and sustainable recovery.
“Our economic focus is
built on pursuing a disciplined approach to our financial management, reducing
the cost of governance and increasing its impact. This is being attained by
efforts to maximise revenues and minimise leakages through corruption, waste
and inefficiency. This will release the headroom needed to fund our essential
infrastructure, which will in turn lead to the increased growth of the non-oil
sector and a more diversified revenue base. Our days of reliance on oil as a
principal source of revenue must be put firmly in our nation’s economic
history. That process of adjustment is painful but like “’ good medicine” is
the only effective cure.”
She said a key element
of the enabling environment is the de-risking provided by the insurance
industry.
Quoting NIA sources, the
Minister said that Nigeria with a penetration of 0.3% recorded total industry
Gross Written Premium (GPW) of N350 billion in 2015. “If we
collectively set a 7-year target of achieving Africa’s average penetration of
3.5%, we can transform our industry into one with GWP of N4.5
trillion by 2023.
To achieve this, the industry will have to grow at a Compound
Annual Growth Rate (CAGR) of 44% from 2017 to 2023. This is in no way an
impossible target and in fact represents the type of ambitious objectives we
need to set for ourselves as several sectors in Nigeria including Telecoms,
Banking and Pensions Management have been able to record such impressive growth
through the collective support of all stakeholders. It is also consistent with
the Change mandate of His Excellency President Muhammadu Buhari. We have no
reason to be different.”
She reiterated the need
to act urgently, as the development of the Nigerian insurance industry will
come with other attendant benefits that are critical to achieve the
type of growth and change for the economy and for the large number of Nigerians
who have been deprived of the financial stability, protection and business
growth that developed insurance markets have provided for their citizens for
centuries. All successful economies are characterized by a strong investment
culture of which insurance plays a key role.
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Pix: The Minister of Finance,
Mrs. Kemi Adeosun (3rd left) holding a plague presented to her
at the National Insurance Conference 2016, in Abuja, Monday. To her right are
Commissioner for Insurance, Alhaji Mohammed Kari and Chairman, the Nigerian
Insurers Association, Mr. Eddie Efekoha. To the Minister’s left are Chairman,
National Insurance Conference Planning Committee, Mrs Yetunde Ilori; President,
Chartered Insurance Institute of Nigeria, Lady Isioma Chukwuma and President,
Institute of Loss Adjusters of Nigeria, Mr. Ralph Opara.
