The current national automotive policy and the oil and gas and housing sector development, among others, have potential of $105.24 billion or N17.6 trillion that could boost insurance growth in the next four years, analysts have said.
The estimate is based on the positive signals coming from the implementation of the policy which has been witnessing new investments from within and outside the country.
Also, the privatisation of the downstream sector and recent establishment of the Nigerian Mortgage Refinace Company (NMRC) are oppotunities for long term housing loans to Nigerians , which could impact insurance uptake.
Consequently, the development will spure 18 percent growth on the present premium of N300billion, which is expected to turn-around the fortunes of the insurance sector, increase its contribution to GDP and position the industry for competitiveness in the nation’s financial services market.
“Opportunity for growth in the insurance sector in the next four year years, is estimated at $105.24billion”, Bismark Rewane, chief executive, Financial Derivatives Company Limited, said in the current Insurance Outlook .
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Rewane added,“I see an 18 percent annual premium growth rate, and if current reform programmes in these sectors are fully implemented, insurance will emerge stronger.
He said huge investment in the automotive industry would boost manufacturing and plant acquisition, as well as auto insurance policy.
According to him, new investments in the housing sector as well as oil and gas, are key growth factors that should encourage purchase for insurance policies, boost sector premium and enhance its contribution to GDP.
Paschael Egerue, managing director/CEO, Enterprise Trust Insurance Brokers Limited, said the growth potential for the insurance sector is huge, if the affected sectors achieve their set goals, because there are a lot of constraints from policy to environment, as well as infrastructural challenges.
Egerue said, “For instance, the automotive policy is a right step to boost the local economy but the challenges are enormous. The environment is tough; Infrastructure is a challenge; power is not there. How are they going to become sustainable to be able to affect other sectors like insurance?”
He also observed the needed for operators in those sectors to embrace insurance and make it part of their growth plans, saying that is the only way insurance can benefit from the investments.
“The Automotive Policy no doubt, has encouraged people to go into manufacturing and plant acquisition, meaning that these assets would need insurance.”
Beyond that, the policy is expected to lead to more people being able to afford vehicles which would then need to be insured, Egerue noted.
He said this would significantly enhance uptake for at least genuine motor third party insurance, which on the long run increases penetration and generates more premium income for the industry.
As at the end of 2014, insurance industry premium, according to the industry regulator, the National Insurance Commission (NAICOM) was in the neighborhood of N300 billion. From 2012 figures, motor insurance contributed the highest amount of premium, equal to 25.84 percent, while oil and gas contributed 21.22 percent for that year.
The Federal Government had through the Minister of Industry, Trade and Investment, Olusegun Aganga, introduced NAP in October 2013 to join the list of initiatives centred on backward integration and import substitution. The overall aim, Aganga said, was to insulate the nation’s economy from becoming perpetually stunted due the age-long practice of dumping used products in the country, thereby draining her foreign reserves, while enriching other nations.
Aganga said the policy was loaded with huge incentives, including robust technology transfer and the creation of at least 700,000 jobs, with 210,000 indirect jobs in the SMEs that would feed the assembly plants. For the policy to blossom, the Federal Government in August 2015 introduced a 70 per cent hike in tariffs for used vehicles.
On the oil and gas side, the National Content Development Act allows companies domiciled in Nigeria to retain up to 70 percent of risks emanating from the local market until capacity is exhausted.
As at the end of 2013, local insurance companies have been able to retain up 30 percent of the risks, while the remaining was still going offshore.
But with the recent launch of the $4 million Energy and Allied Risks Insurance Pool, owned by some insurance companies in Nigeria, the sector is expected to increase its stake.
The group said the pool was formed to retain capacity in oil and gas underwriting, curb capital flight and grow the market in energy and allied risks underwriting.
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