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Coronation Research releases Outlook for Insurance Sector

Nigeria’s insurance industry has not shared in the growth experienced by other Nigerian financial services, notably banks, pension funds and mutual funds.

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Coronation Research releases Outlook for Insurance Sector

Nigeria’s insurance industry has not shared in the growth experienced by other Nigerian financial services, notably banks, pension funds and mutual funds. In fact, it has hardly grown in real terms over 10 years. This is according to a report from one of the leading research houses in Nigeria – Coronation Research (a part of Coronation Merchant Bank).

Without scale, the industry suffers from poor returns on equity. Yet its smallness is also its opportunity. If it were to grow to the level reached by countries with similar GDP per capita, it might grow by a factor of 10 times in real terms in eight-to-10 years. The technological infrastructure and data necessary for expansion are largely available.

Recently, the National Insurance Commission (NAICOM) announced the introduction of new capital requirements, due in June 2020 for the sector. We believe these will reduce the current 59 companies to around 25. There are close parallels with the banking reform of 2004. The banking industry grew rapidly after that, so the question is how the insurance industry can grow after 2020. In the meantime, there will be capital raising and M&A.

[READ MORE: Coronation Merchant Bank wins Best Investment Bank in Nigeria award]

Insurance, policy

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According to Guy, Czartoryski, Head, Coronation Research, “to position the sector for radical growth, one must consider the lessons learned in Asian markets, and also in West Africa which shows how insurance can be rolled out to tens of millions of customers. Cooperation between regulators is critical, as are distribution partnerships with banks and telecom companies. Fresh capital is necessary for development, but a fresh strategic approach is required to reach the industry’s potential.  

Nigeria’s insurance sector presents perhaps the most remarkable investment case of any industry in Nigeria.  At one level the business case is very simple. Insurance penetration, at 0.31%, is extremely low, even compared with countries with similar GDP per capita, for example, India with insurance penetration at 3.69%. Experience in other countries shows that, in the right conditions, insurance can be rolled out to India’s level in eight to 10 years. So Nigeria could go from 0.31% penetration to 3.69% penetration in 10 years.”

He further stated that, “Nigeria has achieved great things in financial services.  Pension Fund penetration is an example, with the total assets under management (AUM) of its pension funds growing, in real terms, at 9.8% between 2008-2018 and taking the proportion of the population covered up to 4.3% and rising.  However, the insurance industry has lagged its other financial services. Conditions have not been helpful for growth. Experience from other markets, particularly in Asia, suggest three remedies. First, government and regulators – not only insurance regulators but bank and telecom regulators, too – need to cooperate: there are gains for all. Second, the roll-out of micro-insurance with the development aim of financial inclusion is key to familiarizing and educating the market. Third, technology plays a key role in partnerships and distribution

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“NAICOM’s current reform of the insurance industry shares essential features with the 2004 reform of the banking industry under Professor Charles Soludo, then Governor of the Central Bank of Nigeria (CBN). Just as NAICOM appears to seek consolidation and an overall reduction in the number of players through stringent capital requirements, so too did the CBN in 2004.

“The result of 2004’s banking reform was to reduce the number of banks from 89 to 25. As already stated in the report from Coronation Research, 2020 could see the number of insurance companies fall from 59 to around 25. If some insurance companies are actually eliminated rather than consolidated by this process, then the survivors will enjoy market share gains. The banking sector enjoyed a boom after 2004, so the question is how the insurance industry will grow after 2020. It is, however, important to note that economic conditions between 2005-08 were different from today, with rising oil prices bringing in a very high level of foreign direct investment from which banks benefited, sometimes directly.”

In conclusion, as with banks after 2004, there exists the opportunity for the re-capitalised insurance industry to make enormous gains from 2020 onwards, not only in terms of expanded underwriting capacity but also (as was the case with banks after 2004) by attracting millions of new accounts. As contained in the report, Nigeria’s insurance penetration, at 0.31%, is less than one-tenth of that of India (with similar GDP per capita) which suggests significant untapped potential. The business opportunity exists because of Nigeria’s very low bases in insurance penetration and insurance density.

[READ ALSO: Nigeria Weekly Update by Coronation Research]

ABOUT CORONATION MERCHANT BANK

Coronation Merchant Bank was established to fill the gap in a long-underserved market segment, seeking to address the need for long term capital across key sectors of the economy. The Group offers investment and corporate banking, private banking/wealth management and global markets/treasury services to its diverse clients.

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Driven by its vision of becoming Africa’s premier Investment Bank, the Bank has been the recipient of numerous International and National awards for product innovation and sound corporate governance practices. Some of the international awards it received in 2018 include Best Investment Bank in Nigeria by World Finance, Fastest Growing Investment Bank by Global Banking & Finance Review, Best Investment Bank by Global Business Outlook and Best Investment Bank in Nigeria by BAFI Awards.

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ENDSARS

#EndSARS: Archbishop of Canterbury condemns Lekki shootings

The Archbishop of Canterbury has joined his voice to the condemnation of the shooting of protesters in Lagos.

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#EndSARS: Archbishop of Canterbury condemns Lekki shootings

The Archbishop of Canterbury, Justin Welby says he condemns the shooting of unarmed protesters in Lekki and urges President Muhammadu Buhari to ensure that lives are protected.

The Archbishop, who is the Chief of the Anglican Church globally disclosed this on Wednesday morning, as the  International Community reacted to videos of protesters getting shot at the Lekki tollgate.

Recall Nairametrics reported that several social media accounts revealed peaceful protesters were being shot at by the military at the Lekki toll gate holdout for the #EndSars protest.

The Nigerian Army, however,  denied deploying soldiers to attack #EndSARS protesters who assembled at the Lekki Toll Plaza.

The Archbishop earlier said in his statement, “I condemn in the strongest terms the reported deliberate shooting of unarmed protesters in Lagos and other parts of Nigeria.

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“I have urged President Muhammadu Buhari directly to ensure that lives are protected – and I say that again now.

“I mourn for Nigeria. May God save Nigeria.

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ENDSARS

JUST IN: #EndSARS: NPA headquarters set on fire by hoodlums

The headquarters of the NPA in Lagos has been allegedly set on fire by hoodlums.

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The headquarters of the Nigerian Ports Authority in Marina, Lagos has been reportedly set on fire by hoodlums involved in the #EndSARS protests.

According to some social media reports, the hoodlums who seem to be protesting the shooting of unarmed protesters at the Lekki Tollgate set ablaze the NPA building on Wednesday, October 21, 2020.

Details later…

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ENDSARS

Just-in: #EndSARS: Lagos suspends activities, declares a three-day lockdown

Governor Sanwo-Olu has directed an immediate suspension of all state activities for the next three days.

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Lagos announces resumption time table for public and private schools, FESTAC town, Lagos cancels 2018 land use charge, LAND USE CHARGE, Lekki sealed buildings, Lagos state governor issues new guidelines for lockdown, consider full reopening of its economy

The Lagos State Government has suspended all government activities and declared lockdown for 72 hours due to growing violence in the state.

This was disclosed by Governor Babajide Sanwo-Olu in a live broadcast on Wednesday.

Some hours ago, eyewitnesses claimed armed uniformed men opened fire on #EndSARS protesters at the Lekki tollgate area of the state on Tuesday evening.

Sanwo- Olu said, “Fellow Lagosians, in the sensitive mood and in the mood of the nation at this time, I have directed further that we have an immediate suspension of all state activities for the next three days, except those that are connected to the security activities in the state and the management of the current issues.

“I have also directed that at all public buildings within our reach, that we lower the flag for the next three days as a mark of respect and solidarity for the protests.”

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Nairametrics had earlier reported that Lagos had declared a 24-hour curfew in the state, starting from 9pm on Tuesday.

This is due to the raging #EndSARS protests and demonstrations in the state, which has been hijacked by criminals and hoodlums with attacks on innocent citizens and the destruction of properties.

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