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By Henry Uche [email protected]
The National Insurance Commission (NAICOM) has revealed that the Nigerian insurance industry in the third quarter of 2022 generated about five hundred and thirty-three billion N532.7billion in Gross Premium Income (GPI) at a Year on Year (YoY) growth rate of about fifteen per cent during the period.
NAICOM in its third quarter bulletin of the insurance market performance said the contributors of this premium under non-life and Life businesses are: Motor with 45.3billion, fire with 65.2billion, general accidents with 34.8billion, Marine with 36.7billion, oil and gas with 95.9billion, miscellaneous with 32.0billion, and life with 221.8billion.
NAICOM likened this performance to the Nigeria’s growth in real Gross Domestic Product (GDP) which stood at 2.3 per cent during the same period, while the insurance industry soares at a higher rate of about fifteen (14.9 per cent) per cent growth rate.
According to NAICOM, there has been a continued development of the Life Insurance business as driven by its component of the Individual Life.
“The Non-Life segment sustained its market dominance at 58.4 per cent of the total premium generated. Insights in the segment show Oil & Gas was the leading driver at 30.8 per cent with Fire Insurance following at 21.3 per cent. Motor Insurance stood at 14.6 per cent while Marine & Aviation, Gen. Accident and Miscellaneous reported a share of 11.8 per cent, 11.2 per cent and 10.3 per cent respectively.
“Life business on the other hand recorded 41.6 per cent of the market production as its share contribution gradually closes up. The share of Annuity in the Life Insurance business lagged at about twenty six per cent (25.5 per cent) while Individual Life was at 41.2 per cent of the premium generated during the period.”
On premium Retention Capacity, NAICOM maintained that though the Insurance Industry’s operational environment remains challenging due to global and domestic economic challenges, its confidence remained high as affirmed by the relevant retentions situation. It stressed that the Life business retention for the period was 94 per cent while non-life recorded a ratio of 55 per cent as the industry average stood at about seventy-one (71.4 per cent) per cent. “Ineed, in the Life Insurance business recorded commendably, a near perfect point of about ninety-four (93.8 per cent) per cent during the period under review.
“Various classes in the non-life segment of the market shows that all classes stood at an above average position and, except for the Oil & Gas (36.9 per cent) business which was a further decline when compared to the same period in 2021 in which it recorded about forty-two (41.9 per cent) per cent in retention share.”
On Insurance Claims Component, the Commission revealed also that during the period under review, the gross claims reported by market of N242.6billion was slightly lower compared to the corresponding period of 2021, signifying a decline of -2.3 per cent in the total claims reported by policyholders. However, the ratio of total claims to gross premium stood at about forty-six per cent during the current period.
“The net claims paid on the other hand stood at about N207.2bn signifying an 85.4 per cent of all gross claims reported during the period. The Life Insurance business recorded a near perfect point of 95.0 per cent claims settlement against all the reported claims while non-life segment stood generously at above seventy (72.4 per cent) per cent during the same period. Remember, insurance claims component defines the essence of insurance business as a whole and indeed a major factor in consumer confidence building.
“The array of proportional claims settlement took a direct reflection of the market premium retention as Motor Insurance retained its lead, posting a claims settlement ratio of about 91 per cent. This is followed by Miscellaneous insurances reporting about 81 per cent as paid claims ratio to all reported claims during the period while General Accident (74.4. per cent), Marine & Aviation (74.3 per cent) and Fire Insurance (59.6 per cent) trailed in that order”
The Oil & Gas business stood out as the most improved portfolio in this respect at about sixty five (65.3 per cent) per cent of claims settlement ratio, an increase of forty-one points compared to its position of 23.9 per cent recorded in the corresponding period of 2021. Similarly, the claims settlement ratio of the life business stood at 95 per cent while the aggregate industry average was recorded at 85.4 per cent during the quarter.
On profitability of the sector, NAICOM said the insurance industry despite its smaller relative size compared to others in the Nigerian financial system have consistently sustained its enviable growth rate and profitability strides, notably in the third quarter of 2021. During the review period, it posted an industry loss ratio of about forty seven per cent (46.7 per cent) indicating a viable cost effectiveness in the market. That is, a ten point improvement compared to its prior position in the preceding quarter.
“This is occasioned by a robust performance of Non-Life sustaining its positive trajectory at 38.9 per cent net loss ratio in the current period which stands at a ten point improvement relative to its position in the second quarter. In the life segment of the market, the loss ratio also dropped from 67.6 per cent to 54.6 per cent over the period of three months in the third quarter. Drivers for lower net loss ratios were of some twenty (20) underwriters with a record of net loss ratios not above twenty five per cent (25 per cent). In the overall analysis, despite the fact that this is an occasion for the third quarter, it is yet an indication of a viable cost-effective practice in the market.”
Regarding market concentration risk, it the extent and pattern of the competition intensity in the market as indicted by its concentration exposure during the third quarter remained the same as in the prior period. “In the non-life business, the total premium generated in the market during the period was largely better in terms of spread across underwriters relative to the life segment.
Analysing the Market Size, its total industry Assets continue to grow in the third quarter albeit, at a slower pace compared to the preceding period. “The market size stood at N2,087billion representing about two per cent (2.3 per cent) increase quarter on quarter. The industry is expected to soon experience an explosive growth in size if the on-going regulatory measures in terms of recapitalisation and market deepening drive are achieved.
