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By Henry Uche, [email protected]
As Nigeria braces for a nationwide protest scheduled for August 1, concerns are mounting among risk managers and insurance professionals about the potential consequences. The planned protest, driven by widespread dissatisfaction and anger, poses significant risks to life and property. While state and federal governments have urged citizens to opt for dialogue over demonstrations, the potential for unrest remains a pressing issue.
In an interview with Daily Sun, Mr. Raymond Akalonu, former President of the Risk Managers Society of Nigeria (RIMSON), outlined the possible impacts on the insurance sector and the broader economy.
Economic implications
Protests can severely disrupt economic activities, forcing businesses to close or reduce operations. This disruption can lead to a decline in productivity and revenue generation, affecting the livelihoods of many.
Damage to infrastructure
Protests often result in damage to public and private property. The costs associated with repairs and reconstruction can be substantial, burdening both the government and private sector.
Decreased investor confidence
Frequent or violent protests can deter investors, particularly foreign investors, leading to reduced foreign direct investment. This can further strain an already fragile economy, resulting in decreased revenue and economic instability.
Impact on tourism
Tourism, a vital source of revenue, can suffer as potential visitors may avoid a country experiencing unrest. This decline can have a cascading effect on related sectors, exacerbating economic woes.
Brain drain
Unresolved social and economic issues, such as those prompting the protests, may accelerate the emigration of professionals, known as the “Japa” phenomenon. The resulting brain drain can deplete critical sectors like IT and healthcare, further weakening the nation’s infrastructure.
Implications for the Insurance sector
Protests can lead to a surge in insurance claims related to property damage, business interruption, and liability. The #EndSARS protests, for instance, resulted in over 11 billion naira in claims for insured losses, highlighting the financial strain on insurers.
Higher premiums
In response to increased risk, insurance companies may raise premiums. This adjustment helps protect the financial health of insurance portfolios but can also make insurance less accessible to the public.
Reduced insurance penetration
The chaos of protests can deter individuals and businesses from purchasing insurance, especially if they perceive the risk as too high. This reluctance, coupled with the potential closure of insurance offices, can lead to a decline in insurance penetration.
Operational disruptions for Insurance companies
Protests can disrupt the daily operations of insurance companies, complicating the processing of claims and other business activities. This was notably evident during the EndSARS protests.
To mitigate these risks, the insurance sector may need to offer specialized products that cover strike, riot, and civil commotion (SRCC) risks. Strengthening reinsurance treaties can also provide a buffer against large-scale losses.
Recommendations for RIMSON
RIMSON, as Nigeria’s premier risk management society, can play a crucial role in mitigating the risks associated with protests. Key steps include: conducting risk assessments: RIMSON should carry out thorough assessments to identify potential hazards and communicate findings to relevant authorities and businesses.
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Developing contingency plans
Creating plans for various scenarios, including property damage and disruption of services, is essential for preparedness.
Members should receive support on securing premises, protecting assets, and ensuring business continuity during protests.
Facilitating collaboration
RIMSON should encourage information sharing between members, law enforcement, and other stakeholders to better manage protest-related risks.
Offering training and workshops
Education on crisis management, emergency response, and conflict resolution can empower businesses and individuals to handle crises effectively.
Insurance products for political and social unrest
Several insurance products can safeguard businesses against losses from political and social unrest: Political violence insurance: It covers damage from political violence, terrorism, and civil unrest.
Another is business interruption insurance which compensates for lost income due to forced closures or reduced operations.
We also have property insurance that protects against damage to physical assets from looting and vandalism.
There is liability insurance which shields businesses from lawsuits stemming from injuries or property damage.
Cyber insurance covers cyber-related incidents during social unrest. There is equally supply chain insurance that protects against disruptions in supply chains.
Terrorism insurance provides coverage for losses due to terrorist acts and political risk insurance which safeguards against losses from political risks like expropriation and nationalization.
While not all these policies are currently available in Nigeria, insurers can work with reinsurers to offer comprehensive coverage.
Collaboration between government and insurance companies
To mitigate protest-related risks, collaboration between the government and insurance companies is essential:
Risk assessment and contingency planning which requires joint efforts to identify and plan for potential impacts.
There is need to establish communication channels and ensuring access to emergency services and developing specialized insurance products and offering targeted support.
Creating a contingency fund can also assist businesses and individuals in recovery efforts.
Message to Nigerian youths
While the right to peaceful assembly is constitutionally protected, it is crucial to avoid violence and property damage during protests. The destruction of public and private assets only exacerbates societal problems. Youth are encouraged to collaborate with law enforcement to prevent protests from being hijacked by criminal elements. Let peace and constructive dialogue prevail for the betterment of all.
By taking these proactive measures, Nigeria can navigate the complexities of protests while safeguarding its economy and ensuring the well-being of its citizens.
