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