Nigeria Insurance Country Overview
2013
Table of Contents 1. Macroeconomic Picture ................................................................................................... 3 2. Insurance Market in Nigeria ............................................................................................. 4 3. Global Insurance Outlook ................................................................................................. 6 4. Competitive Scenario - Nigerian Market ........................................................................... 8 5. References ....................................................................................................................... 9
2
1. Macroeconomic Picture
Source: IMF
Among the growth markets in sub-Saharan Africa, Nigeria is seen as a potential leader, given its huge energy industry and large population. With around 160 million people, Nigeria is the most populous nation on the African continent and seventh in the world. In 2012, Nigeria’s GDP was $269 billion it has been achieving year-on-year GDP growth of more than 6% since 2008 and projected to grow at around 7% annual average growth between 2002 and 2017. The positive economic growth experience coupled with persistent poverty signifies a country characterized by a thriving oil economy and high-income elite on the one hand, but still rudimentary development on the other hand. Indeed, though Nigeria is one of Africa’s top oil producers, it still ranks as a low-income economy according to the World Bank classification. Key economic development factors that contributed to the marginal decline include lower agricultural output, financial sector crisis and reforms and disruptions in the oil & gas sectors. The emphasis of Nigerian government is on Growth and Fiscal Correction and the need to balance several conflicting objectives such as reducing inflation without impairing growth and emphasizing social inclusion at a time when fiscal consolidation is of paramount importance. However, the trend of the country's headline inflation rate was in double digit, with core inflation largely unresponsive to monetary policy actions; the 4,8 trillion naira budget was confronted by serious security situation and unemployment rate that increased to 23.9 percent.
3
2. Insurance Market in Nigeria
The Nigerian insurance industry recorded Gross Premium Income of USD1.55 Bn in 2012 with Non-Life segment dominating the industry with around 75% share. The increase from USD1.3 Bn in 2010 to USD1.55 Bn was due to the implementation of the Market Development and Restructuring Initiative (MDRI). Non-Life Insurance by Segment in Nigeria
In Life insurance sector the realities of the past three years show that the number of those insured increased from 0.5 Mn to 1.5 Mn in 2012.This shows that the number of the insuring public tripled within three years. Compulsory motor-vehicle insurance makes up around 20% of the contracts followed by Oil and Gas with around 18% share. Oil and gas businesses will continue to contract international companies to insure their Nigerian operations as the capacity of local insurers is limited. Nigeria’s consumer market in general is “not very strong” at present, but there is hope to see that improves as the country’s energy and other commercial sectors continue to expand. The country’s oil and gas industry is set to be a very big driver of commercial lines coverage.
4
This is an economy where insurance companies have always trailed the banks, but they have a regulator now that is determined to put the insurance industry at the forefront. The mounting interest in Takaful and Micro-insurance models schemes coupled with appropriate country-wide diagnostic research study will lead to implementation of a social benefits program through insurance with a resultant effects of higher insurance awareness, market deepening and increase in insurance penetration. The outcome will therefore be increased investments and improved standard of living with a growing economy. In spite of these achievements, the industry has a long way to go to meet up with developed countries including South Africa. “The value of insurance contracts should rise to about $6.4 billion in 2017 from 1.55 billion now. Penetration should increase to 22.5 percent of the insurable population in four years from 10 percent currently� Insurance Commissioner of Nigeria
5
3. Global Insurance Outlook The highest levels of growth in primary insurance business continue to come from emerging markets. There is still plenty of catch-up potential, although in some countries growth rates have now reached their peak or are falling slightly. Real growth in P&C insurance premiums – 2012-2014 (%)
In P&C business, it is expected that real premium growth in Africa and Middle East would be of about 3.6% and 4.7% in 2013/14. In many parts of Asia, such as China and India, real growth rates could be as high as 10% or more. Real growth in Life primary insurance premiums – 2012-2014 (%)
In life insurance, it is expected that 2013/14 may bring even higher levels of real premium growth in emerging markets – in many Asian and Latin American countries considerably more than 10%, and over 15% in some cases. In Africa and Middle East, the growth of 8.2% seen in 2012 is now forecast to return to the level of 4-5% in 2013.
6
Global ranking of regions according to real growth in primary insurance premiums until 2020 (%)
The long-term prospects for the insurance markets – between now and 2020 – are of course subject to much more uncertainty than the short-term forecasts. Important drivers of expected insurance market development – in both life and non-life business – are economic factors such as economic growth, an increase in incomes, and inflation. These factors are expected to provide a stimulus to the insurance industry, primarily in emerging markets. Growth in the life insurance and P&C segments will continue to be significantly more dynamic in emerging markets than in industrialised countries up to 2020. Emerging countries in Sub-Saharan Africa could see annual real growth rates of around 5%, both in P&C and Life.
Worldwide growth in primary insurance remaining higher than GDP growth, with reinsurance growing more slowly
Regional differences remain – emerging markets are growing strongly, North America is on the path to recovery, but progress in Europe is very slow
7
4. Competitive Scenario - Nigerian Market Leading Insurance Providers GWP for Top 10 Life insurers 2011
GWP for Top 10 Life insurers 2011
The growth in the industry has been generated from 59 insurance companies, 2 reinsurance companies, 550 brokers and about 1500 insurance agents. Nigerian insurance market has experienced consolidation driven primarily by higher capital requirements. The financial crisis also contributed to merger and acquisition activity, as the Central Bank of Nigeria passed a directive ordering all deposit money banks to divest their non-banking interests or form a holding company structure. However, Nigeria’s insurance market remains crowded. There is still potential for further consolidation. The industry remains quite fragmented with only two non-life companies maintaining market shares of more than 10%, in spite of initiatives over the last few years to rationalize the number of companies holding licenses to carry out insurance business. In addition, the high number of intermediaries further reduces the net premium earned by insurance companies. This has resulted in the insurance sector being fragmented, with further consolidation required.
8
5. References Munich Re- Insurance Market Outlook NAICOM (National insurance Commission) Lloyds – Country profile Nigeria The Centre for Financial Regulation and Inclusion - cenfri.org AM Best - Reinsurers Lead Growth Markets in Sub-Saharan Africa Insurance Information Institute
9