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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]

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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

“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.

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[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.

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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Coronavirus

FG approves N8.49billion to procure COVID-19 testing Kits, others

The fund is to procure 12 items in various quantities to strengthen the testing for COVID-19.

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President Muhammadu Buhari's full speech at China-Africa Extraordinary Summit on June 17, 2020

The federal government has approved N8.49 billion to procure 12 items in various quantities to strengthen the testing for COVID-19 by Nigeria Centre for Disease Control (NCDC).

The approval was given during the 11th virtual meeting of the Federal Executive Council presided over by President Muhammadu Buhari on Wednesday.

The approval was based on a memorandum presented to the council by the Minister of Health, Osagie Ehanire.

He was joined at the post-FEC press briefing by the Minister of Information and Culture, Lai Mohammed; and the Minister of Environment, Muhammad Mahmood.

He explained that the approval was made to further equip the NCDC to respond appropriately to the community transmission phase of the pandemic.

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Coronavirus

COVID-19: Russia to start mass inoculation of vaccine this month as it insists on its safety

The vaccine is said to be undergoing Phase 3 trials, which is the final stage.

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COVID-19: J&J starts vaccine trials on humans after success on monkeys

Russia has announced that it was going to start mass vaccination of the world’s first COVID-19 vaccine this month before the completion of clinical testing. This is just as it waved off concerns by the international community and some scientists about the safety of the vaccine.

These views were made known by the Russian Health Minister, Mikhail Murashko, on Wednesday, August 12, 2020, during a press briefing.

The Health Minister in his statement said, ‘’Western colleagues, who can sense the competitive advantage of the Russian drug, are trying to express some opinions that are completely unjustified in our view. This vaccine is a platform that is already well-known and studied,” he said, adding that other countries have developed antidotes under accelerated testing programs.’’

READ MORE: COVID-19: WHO warns there may never be an immediate solution to the virus

Murashko also said that the authorities plan to start inoculating medical workers and other risk groups within 2 weeks on a voluntary basis while pointing out that the vaccine will be made available to the general public from October.

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Nairametrics had reported yesterday that the Russian President, Vladimir Putin, in a televised meeting, announced that Russia has registered the first COVID-19 vaccine in what they see as a propaganda coup amid the global race for the development of a vaccine against the coronavirus disease.

This announcement has raised a lot of international concerns with the German Health Minister, Jens Spahn, saying on Wednesday, that Russia’s COVID-19 vaccine has not been sufficiently tested, adding that the aim was to have a safe product rather than just being first to start vaccinating people.

He said in a radio chat that it’s not about being first but rather about having an effective, tested and safe vaccine.

Experts have expressed their concerns over Russia’s decision to grant approval before the final trials of the vaccine have been completed.

READ MORE: WHO gives condition for approving Russia’s COVID-19 vaccine as the vaccine gets a name

He said that as much as he will be pleased to have a good vaccine for the virus, he pointed out that the Russians are not disclosing much about this vaccine.

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This vaccine which is developed by Gamaleya Institute in collaboration with the Defence Ministry and the Russian Direct Investment Fund (RDIF), is said to be undergoing Phase 3 trials, which is the final stage.

However, a World Health Organization (WHO) database still lists the vaccine as still only in Phase 1 trial, which is the earliest stage.

The RDIF said that it can produce over 500 million doses of the new vaccine in a year in 5 countries, just as it disclosed that a minimum of 20 countries are currently interested in having access to these vaccines.

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The WHO had earlier revealed that it is currently discussing with Russia and pointed out that in granting prequalification of the vaccine, a detailed review of data from clinical trials will be required.

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Economy & Politics

FG completes 11 projects to drive Digital Economy

The government has been pushing the Digital Economy in a bid to diversify economic productivity.

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FG completes 11 projects to drive Digital Economy, FG orders NIPOST to stop cash transactions , Pantami moves to ban automatic voicemail service by telcos  , Why Nigeria’s Data woes may not end soon , Pantami reacts to CBN’s ATM fee cut, keeps mute on directive to cut data cost , Pantami condemns FIRS move to collect stamp duty, MTN, Airtel, others disregarding Pantami’s voicemail, data directives on all front , FG warns State governments against RoW charge increase, FG reiterates commitment towards implementing broadband strategy ,FG reiterates commitment to 75% broadband penetration in 5 years 

The Federal Ministry of Communications and Digital Economy announced that it has completed 11 projects to drive its Digital Economy programme.

This was announced by the Minister of Communications and Digital Economy, Dr. Isa Pantami, during the phase 2 commissioning of Nigeria’s Digital Economy drive.

The Nigerian Government has been pushing the Digital Economy in a bid to create growth and diversify economic productivity in the nation, starting with the Digital Economy drive which was added to the portfolio of the Ministry of Communications.

READ MORE: Nigeria’s broadband penetration rises, yet internet remains slowest in the world

Nairametrics reported last month that the Nigerian Communications Commission (NCC) also approved the creation of a Digital Economy Department, which will be responsible for promoting the digital economic agenda of the federal government. The department will renew the commission’s strategy for delivering its programmes and policies, and give the necessary push to promote the national digital economy.

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The projects were launched with the supervision of the Ministry of Communications and Digital Economy and would be operated by the Nigerian Communications Commission (NCC), National Information Technology Development Agency, (NITDA) Nigerian Postal Services (NIPOST ) and The Universal Service Provision Fund (USPF) and would be located nationwide.

READ ALSO: NCC issues 10 new VAS licences in 2019, projects market to hit $500 million 

The 11 projects are:

  1. Emergency Communications Centre (ECC) llorin, Kwara State.
  2. Emergency Communications Centre (ECC) Calabar, Cross River State.
  3. School Knowledge Centre (SKC), Gombe State.
  4. Information Technology Innovation Centre, Kogi State.
  5. Tertiary Institution Knowledge Centre (TIKC), Delta State.
  6. New Neighborhood Post Office, Delta State.
  7. Remodelled National Mail Exchange Centre, Bayelsa State.
  8. e-Health/Data Sharing Centre, Bauchi State.
  9. Virtual Examination Centre, Borno State.
  10. Information Technology Capacity Building Centre, Jigawa State.
  11. Information Technology Capacity Building Centre, Imo State.

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