Nige­ria in­sur­ance sec­tor ex­pands 18% in Q1 2018, faster than over­all econ­omy

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THE NIGE­RIAN IN­SUR­ANCE sec­tor, which suf­fered a set­back in the last two quar­ters of 2017, con­tract­ing 1.9 per­cent and 15.7 per­cent in Q3 and Q4 re­spec­tively de­spite growth recorded in the over­all econ­omy, re­bounded in Q1 2018, ex­pand­ing 18.1 per­cent rel­a­tive to 1.95 per­cent growth recorded by the econ­omy as a whole. De­spite grow­ing at a faster pace than the econ­omy, Nige­ria’s in­sur­ance sec­tor is still one of the most un­der­de­vel­oped com­pared to peers. With a pop­u­la­tion es­ti­mated at c.196.1 mil­lion peo­ple, a grow­ing mid­dle class and in­creased life ex­pectancy rate for Nige­ri­ans (54.5 years av­er­age for men and women in 2017 from 53.4 years in 2016), the po­ten­tial for growth in the sec­tor is sig­nif­i­cant. At op­ti­mal state, in­dus­try gross pre­mium should be com­pa­ra­ble to over­all con­sump­tion ex­pen­di­ture in the econ­omy, since in­sur­ance is a risk mit­i­gat­ing strat­egy. How­ever, at 0.3 per­cent, Nige­ria has the low­est in­sur­ance pen­e­tra­tion level (mea­sured as in­sur­ance gross pre­mium writ­ten as a pro­por­tion of GDP) amongst no­table African coun­tries – South Africa (14.7%), Kenya (2.8%), An­gola (0.8%) and Egypt (0.6%). Sim­i­larly, the sec­tor’s in­sur­ance den­sity (a mea­sure of in­dus­try gross pre­mium per capita) is still one of the low­est when com­pared to peers – South Africa (US$762.5), Egypt (US$22.8), Kenya (US$40.5) An­gola (US$30.5) and Nige­ria (US$6.2). A 2017 re­view and 2018/19 out­look on the in­dus­try by Swiss Re, a lead­ing global rein­sur­ance firm, in­di­cate that the re­cov­ery in the global macroe­con­omy trick­led into global in­sur­ance sec­tor in 2017, which the Nige­rian sec­tor could not max­i­mize in the pe­riod un­til the first quar­ter of 2018. Ac­cord­ing to the Swiss Re re­port, global non- life pre­mi­ums in­creased mod­er­ately, grow­ing by 3.0 per­cent in 2017, driven by a 6.0 per­cent and 2.0 per­cent pre­mium growth in emerg­ing and ad­vanced economies re­spec­tively. Sim­i­larly, global life in­sur­ance grew by 3.0 per­cent year-on-year (y-o-y) in 2017 (vs. 2.0% in 2016). As ex­pected, emerg­ing economies were the main driver of global growth, with China as the main lead. China ac­counted for 27.0 per­cent of emerg­ing economies’ share of the in­sur­ance mar­ket and pre­mi­ums inched 23.0 per­cent higher in 2017. In 2018 and 2019, pre­mi­ums are fore­cast to rise 4.0 per­cent in each year ac­cord­ing to pro­jec­tions by Swiss re. This sus­tained uptick in pre­mi­ums is ex­pected to ride on the back of in­creased pre­mi­ums in emerg­ing mar­kets where sta­ble eco­nomic growth, ex­pand­ing pop­u­la­tions, ur­ban­iza­tion and a ris­ing mid­dle class are oc­cur­ring. In the same vein, the pos­i­tive trac­tion the Nige­rian econ­omy gar­nered also re­flected on the in­sur­ance in­dus­try amongst other crit­i­cal sec­tors as his­tor­i­cal data sug­gest the in­dus­try grows at a faster pace than GDP when the econ­omy ex­pands, due to ris­ing dis­pos­able in­come. The in­sur­ance in­dus­try in Nige­ria is seg­mented into life, non-life and re-in­sur­ance, with non-life in­sur­ance ac­count­ing for the bulk (48.7%) of to­tal gross pre­mium writ­ten (GPW) while life and rein­sur­ance ac­count for 30.1 per­cent and 21.2 per­cent re­spec­tively.

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