Insurance Sector in Nigeria and AfricaInsurance Sector in Nigeria and Africa The Nigerian Insurers Association (NIA) Chairman, Kunle Ahmed, presented his insights on the insurance industry in Nigeria and its position within Africa. Capital Requirements Ahmed highlighted that Nigeria’s current capital requirements for insurers are relatively competitive within Africa. However, he emphasized the need to consider the size of the market when determining capital requirements. Compared to South Africa’s $50 billion market and Kenya’s over $1 billion, Nigeria’s non-life insurance sector stands at $0.63 billion, while life insurance is at $0.43 billion. Impact of Increased Capital Requirements Ahmed expressed concerns that the proposed increases in capital requirements could negatively impact the insurance sector in Nigeria. He argued that the market is not large enough to support such increases without hindering insurance penetration. Recommendations To balance the need for capital with the objective of deepening insurance in Nigeria, Ahmed suggested a more moderate approach. He proposed minimum capital requirements of N10 billion for non-life insurance and N8 billion for life insurance, positioning Nigeria as the most capitalized insurance market in Africa. Other Concerns Ahmed also raised concerns about other provisions in the proposed bill, including: * The 1% contribution of net premiums to a fund for victims of road accidents, proposing a cap of 0.5% and measures to ensure all vehicles are insured. * The 60-day timeframe for claims payment, acknowledging the complexities of the claims process. * The disproportionate penalties for violations, suggesting encouragement rather than excessive punishment for compliance. Conclusion Ahmed emphasized the importance of promoting insurance penetration in Nigeria and considering the market size when evaluating capital requirements. He called for a balanced approach to regulation that supports the growth of the insurance industry and protects the interests of policyholders.
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Chuks Udo Okonta with a report from the agency
The Chairman of the Nigerian Insurers Association (NIA), Kunle Ahmed, has said
Nigeria’s current capital requirements are relatively competitive within Africa, but the market in other countries is much larger.
He made this known recently at the public hearing on the reform of the insurance law in Abuja, adding that the market in South Africa is about $50 billion per capita, in Kenya it is over $1 billion, while in Nigeria the non-life insurance sector is only $0.63 billion and the life insurance sector $0.43 billion.
“This means we have significant capital looking for limited transactions,” he said.
He said the Nigerian insurance sector is not large enough to support the proposed increases in capital requirements without significant negative consequences.
“Insurance is an international business and we need to look at what is available in other countries, even in Africa,” Ahmed said.
He cited Morocco, which has a capital requirement of $5 million for life and non-life insurance, while Kenya’s requirements are $3.8 million for life insurance and $2.3 million for non-life insurance. He said South Africa has the lowest capital requirements but is one of the largest markets.
Ahmed noted that capital alone does not determine the capacity of an organization or a company. “I agree that it determines your retention, but it is not the only determinant of your capacity. What we risk is that we get insurance companies that do not deepen insurance activities in Nigeria, but just sit down and invest the money they have in other things. I believe we need to focus much more on deepening insurance in Nigeria,” he said.
The NIA chairman suggested a more balanced approach, in contrast to the N25 billion for non-life insurance, N15 billion for life insurance and N40 billion for reinsurance proposed in the bill, recommending a minimum capital requirement of N10 billion for non-life insurance and N8 billion for life insurance, which would make Nigeria the most capitalised insurance market in Africa. “Our focus should be on deepening insurance in Nigeria,” he said.
Ahmed spoke out on other provisions in the bill, expressing concern over the proposed contribution of one percent of net premiums to a fund for victims of road accidents. “This effectively uses the funds of insured persons to support those who do not have insurance.
He proposed that this contribution be capped at 0.5 percent and urged the introduction of measures to ensure that all vehicles in Nigeria are insured.
“We have about 11 million cars in Nigeria or 13 million cars and about 3 million or 3.4 million cars insured. In other words, we are saying that the small people who are insured should take care of the larger number of people who are not insured. We are proposing that we limit this to 0.5%. We should figure out a way to ensure that all cars in Nigeria are insured,” he argued.
Regarding the bill’s requirement to pay claims within 60 days, Ahmed acknowledged the need for prompt payments, but also pointed out the complexity of the claims process.
Ahmed criticized the severity of the penalties prescribed for violations in the bill, describing them as disproportionate. He highlighted Section 100, Subsection 5, which imposes a penalty five times the required contribution to the Road Accident Victims Fund. “Encouragement, not excessive punishment, is necessary for compliance,” he noted.
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The post Nigeria’s per capita non-life insurance market is estimated at $0.63 billion, life insurance at $0.43 billion and South Africa’s at $50 billion. first appeared on Frugals ca.
