Economic development and the demand for energy infrastructure projects has been fuelled by Nigeria’s oil and gas industry, resulting in the country’s insurance market becoming the largest in West Africa, according to a new report from A.M. Best Co.
“Africa’s Diverse Insurance Markets Offer Growth Opportunities, Untapped Demand”
In the report entitled, “Africa’s Diverse Insurance Markets Offer Growth Opportunities, Untapped Demand”, A.M. Best notes total insurance premium in Nigeria reached USD 1.6 billion in 2011, although insurance penetration is modest at 0.6%. The report states the Pension Reform Act, which makes pension insurance compulsory for companies employing more than five people, is likely to drive further growth in life premiums. A.M. Best considers the development of the life portfolio in Nigeria as positive for insurers’ diversification, although management teams may need to demonstrate their skills in these new areas.
Carlos Wong-Fupuy, Senior Director, Analytics, said: “Nigeria’s non-life sector accounted for 74% of total premium in 2011, with drivers including the enforcement of compulsory lines of business such as motor third-party liability, professional indemnity, public and general liability. Motor risks make up more than a quarter of non-life premium in Nigeria. This reflects the country’s oil and gas risks, which result in very volatile growth in gross premiums written and low retention ratios.”
The report notes the 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, the report states Nigeria’s insurance market remains crowded.
Source: Business Wire
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