—— GPI growth by 6% to N223.8bn Q2, 2022
The insurance sector should be the future redeemer of the Nigerian economy given its growth rate, pattern, resilience and yet untapped potentials noting that the Nigerian Insurance industry despite its relative size has proven to be one of the most resilient and fastest growing sectors in the Nigerian economy
According to the paper presented during seminar organized by NAICOM for both Lagos and Abuja based insurance journalists tagged the Facts Behind The Figures of the performance of the Nigerian Insurance Industry from 2017 through to 2022 in the recent past especially, the last five-years.
The said seminar was held on November 04, 2022 at Lagos Oriental Hotel, Lagos with the theme: “The Future of the Nigerian Insurance Sector in a Shifting Landscape,”.
Professor Umaru Baba, Statistics Dept of NAICOM stated during his paper presentation that it defied several economic recessions and the effects of the global COVID-19 pandemic, at a period when other sectors of the economy pointed south
The prof stressed further that the market as measured by the industry gross premium income (GPI) has maintained a steady growth throughout the period of 2017 to the current
Insurance Industry Performance – GPI Evolution
Umaru noted that depicts a growth of 65.6% for the period when it grew from about N372.4b in 2017 to N616.6b in 2021, Year on Year during the period, the rate of growth was put at 14.2% for 2017, 14.5% in 2018 and, 19.2%, 1.2% and 19.7% for 2019. 2020 and 2021 respectively.
“Interestingly the market recorded expansion in 2020 during the pandemic when the real GDP actually contracted (-1.9%) as was the case with most economies around the world
“The industry’s remarkable experience is even better situated when pictured relative to other jurisdictions in a similar and/or emerging insurance markets
“In 2021 for instance, while the annual rate of premium growth in Nigeria stood at 19.7%, it was 12% in Tanzania, 18.5% for Egypt and about 7.6% in the emerging Insurance market of Malaysia
Prof stated that it is apparent that the trend maintained a steady rise except in 2020 of which it took a v-shaped recovery thereafter, rebounded to about 20% in 2021
In 2022, he stated that the GPI stood at N223.8bn in the first quarter, which was 6% growth on YoY and, N369.2b in the second quarter, indicating a 65% QoQ growth and at about 20% YoY
“Apparently outpacing the real economic growth which grew at just about 3.5% during same period
Umaru identified the major drivers during the period of 2017 – 2021 were the special risk insurance of Marine & Aviation at about one hundred and seventy (169.6%) per cent, Miscellaneous Insurance at 98.4% and Life Insurances at 71.3%.
In 2022, however, he revealed that Fire Insurance stood at 32.5% and Life business stood at 24.5% recorded with highest rates at the end of first half of the year (H1) period, YoY.
Retention Capacity
The market has proven resilience not only with regards premium generation but the capacity to retain businesses which signifies sound financial stability and carriage capacity
“In tandem with the GPI growth, it recorded a positive trajectory in business retention from N265.5b to N441.2b (66.2%) over the period of 2017 to 2021, as expressed by the infographic (i)
The retention growth was highest for the Marine & Aviation, growing at 169.7% over the period while General Accident Insurance retention lagged at about 24.6% over the same period. This signifies growing retention capacity by Insurers as the aggregate five-year retention ratio of the industry stood at 72.1% as the portfolios of Motor (93.1%) and Life business (91.8%) led the market, he added.
Even in 2020, when compared, he said the Nigerian insurance industry recorded a retention ratio of about 71.6%, higher than the advanced climes of Australia (69.4%) and Turkey (70.9%) and indeed the developing market of Egypt (58.1%) among others
Claims & Claims Settlement
Umaru said the claims is a primary factor for the quest of Insurance business and a cardinal element in its business model. Normally, Policyholders go for these services with the intent of filing for claims if/when the risk crystallises
“The Insurance market has continued to grow in gross claims reported reflective of the increasing policyholder enlightenment, market confidence from both demand and supply sides, and indeed effects of regulatory measures meant to ensure for claims settlement.
Industry Claims Behaviour 2017-2022
Prof stated that the gross claims reported a fluctuation over the period to peak at a growth proportion of 36.2% over the years representing N336.8b in 2021 from N186.4b in 2017.
According to him, the percentage net claims paid has, owing to Improved market discipline and the approach of customer focused regulation, remained very high around the border of 70%
He cited that In the pandemic year of 2020, despite macroeconomic challenges, about 70% of all reported claims were settled by Insurers within the specified period, the industry also remained profitable with loss ratios within the average range numbers, with highest in 2018 at 59.2%, while lower net claims ratios, ceteris paribus, are good indicator of the desirable situation for profitability good returns on investment in Insurance business
Industry Size
The industry recorded a consistent expansion over the period despite market cyclicals recorded in the capital market especially, during the global COVID-19 pandemic.
“Sustained Assets growth of the industry even during economic recessions, highest in 2020 (34.6%) indicates the immense investment flow and, due to recapitalisation measures taken during that period
For these the industry’s total Assets, almost doubled over the five-year period of 2017 to 2021, this depicting a positive interest of investors in the market at a time associated with macroeconomic volatilities.
“In 2022 as illustrated in figure (j), it recorded an expansion to about N2.3 trillion at the end of first half (H1) which is growing at 12.0% Year on Year
Professor Umaru was of the opinion that based the ongoing performance, the insurance sector should be the future redeemer of the Nigerian economy given its growth rate, pattern, resilience and yet untapped potentials
In conclusion he said available data has shown that, the industry sustained a higher growth rate than most other sectors of the economy and, always higher than the real GDP growth.
Consequently, the NAICOM statistician said for the need to sustain and improve on the current trend, the market deepening drive which is already yielding results, must be unrelenting; thus, Sustaining the current rapid rate of Insurance market growth and ensuring for economic growth, safety, stability, inclusion and development in Nigeria.
