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Insurance sector: The emerging big 5


News » Business
Nigeria

August.04.2014

A CEO of a Nigerian insurance company recently pondered the fact that insurance companies outside Nigeria usually buy or take-over banks, but in Nigeria it is usually the opposite, helping to show the relative underdevelopment of the sector.

Following on BusinessDay’s annual insurance roundtable held last week, we decided to take a closer look at the Nigerian insurance sector.

The sector is undoubtedly the game of the big five firms (Aiico Insurance, Continental, Niger Insurance, Allied, and Mansard) as they have a major share of the market, leaving the small players with little to compete over.

The 2013 full-year results of 11 companies that have released results showed net premium income (NPI) increase by 8 percent to N69.60 billion from N63.34 billion in the preceding year.

Of the N69.60 billion in NPI, Aiico’s share was 27 percent, followed by Continental 18 percent, Niger 14 percent, Custodian and Allied 12 percent, and Mansard 11 percent. This leaves the rest of the insurers with a 16 percent share of the total figure.

The lack of scale of the small operators in the country has raised concerns of analysts who have suggested a regulatory induced merger and acquisition (M&A) as was done in the banking sector.

An increase in the size of insurance firms through M&A and the advantages of synergy will bolster their contribution to the economy.

This strategic inorganic growth mechanism is expedient as the share of insurance in the country’s GDP of 0.56 percent lags behind South Africa with a contribution of 12.9 percent, Kenya 3.2 percent, and Ghana 1 percent.

However, despite the low GDP/capital contribution, the 170 million population and the rising middle class means there are innumerable opportunities to tap into and improve insurance’s contribution to the economy.

We expect the insurance industry will be driven by contributions from the automobile, oil and gas, and housing sectors in the future.

Article Credit: Businessdayonline

Updated 3 Years ago
 

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