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Joseph Inokotong, Abuja
The inability of Nigerian insurance companies to insure the anticipated risks of big and multinational firms operating in the country due to low retention capacity, has resulted in the loss of N16.9 trillion worth of business to their foreign counterparts.
Underwriting firms in Nigeria were only able to insure N37.69 trillion worth of risks locally in 2018.
Based on the current low capacity retention and capital base in the industry, Nigerian underwritters may lose 72 per cent insurance business in the Dangote Oil Refining Company whose insured value is estimated at $6.8 billion to foreign underwritters when the company begins production in 2021.
The development has been attributed to low expertise in local insurance companies in handling certain categories of risks, and their inability to underwrite such risks.
This in the main forced them to cede such capacities to insurance firms outside the country’s shores.
Experts say if the current trend of low underwriting and technical capacity persists in the local insurance industry, it may lead to them losing another $8 billion worth of energy insurance business to foreign insurance firms.
The startling information is contained in a document sourced from the National Insurance Commission (NAICOM), which projected the losses, while justifying its position on the ongoing recapitalisation plan in the industry.
Despite this development, insurance companies in the country said they have been able to retain large chunk of the risks, and an increase in their capital base may place them in a better and stronger stead to handle huge and more complicated risks, said market observers. They also believe that recapitalisation would enable companies realise the sector’s target of N1 trillion annual premium income, which would help them contribute more meaningfully to the country’s Gross Domestic Product (GDP), while deepening insurance penetration and acceptance.The document which rates the top 10 insurance risks, indicates that the Nigerian National Petroleum Corporation (NNPC), under its consolidated insurance package, totaling N35.8 trillion ($99.5 billion), insured N27.9 trillion ($77.5 billion) locally and took N7.9 trillion ($22 billion) risk sum abroad.
