Government reforms in the insurance industry through the process of recapitalisation and consolidation are to restore confidence of the public in the market and enhance international competitiveness of local operators.
Consequently, the principal objective of the reform is to have emergence of bigger and stronger players in the industry with enhanced capacity. The Nigeria insurers in time past had operated on marginal scale and that accounted for why the market had not benefited much, especially in the oil and energy business. The country is much more likely to experience sustained growth if her insurance market develops properly.
Insurance market development is related to improve financial sector performance and insurance market do not develop adequately without both public and private sector development in their infrastructure.
The Vision 2020 have this to say about the Nigerian insurance sector: “The vision is to be the insurance industry of choice among the emerging markets, noted for high market capacity, transparency, efficiency and safety, to attain the position of one of the 20 largest insurance markets in the world by the year 2020.”
For this reason, the reforms is to develop an insurance sector that drives and protects the economy through effective and efficient market structure. Considering the desire for the recapitalisation and consolidation in the insurance industry where on the 5th of September, 2005 the pronouncement was made and 18 months given for compliance. Of course, NAICOM is still driving the reform process. The principal objective of the reform is to have emergence of bigger and stronger players with enhanced capacity, restoration of confidence of the public, enhance the international competitiveness of the local operators.
The Commissioner for Insurance, then Chief Okechukwu Chukwulozie, in his remark on the reforms said: “One of the challenges facing NAICOM at the moment is how to make the shares of insurance companies more attractive to high networth individuals and corporate bodies, due mainly to poor public perception of the industry.”
He said: “To meet some of the challenges, NAICOM is intensifying its sensitisation of the industry and the insuring public, which has yielded positive results so far. The initial lukewarm attitude of the industry towards the reforms may have been tackled and overcome through sensitisation and awareness creation. I commend the industry for coming to reality with the value and benefits of the recapitalisation and consolidation and for seeing the bigger picture.”
He said that the issue of participation of local insurance companies in the oil and gas insurance business is of paramount importance to the industry. “We have made a lot of progress in this respect and we have been receiving the co-operation of the NNPC. We have also taken steps to actualise the domestication of insurance business in Nigeria by giving effect to the provisions of Section 72 of the Insurance Act 2003.”
“This issue of local content, especially in the oil and gas sector is being tackled frontally as a major breakthrough has been recorded by getting Nigerian insurance companies to participate fully in this class of insurance. We do have a committee made up of representatives of all the relevant stakeholders, which is assiduously working on this project to ensure its resounding success.”
It is quite obvious that the future of insurance business is bright in Nigeria, especially with government’s enforcement of 45 per cent local content policy in the oil and gas industry, which will significantly boost insurance income. Over $400 million is expected to be generated as insurance premium by the industry in the next two years. This transformation will not just increase the fortunes of insurance business, but will also throw up new scenarios and opportunities. Strategic steps have been taken to strengthen our push for a huge chunk of this emerging market. The ultimate challenge for us is to grow the Sovereign Trust franchise both locally and internationally.
Meanwhile, the push for closer economic ties of countries within the West African sub-region, the implementation of a single monetary regime in the sub-region, the privatisation of erstwhile public companies, which were hitherto performing below expectation, and the entrance of international players into sectors such as telecommunications, petroleum and energy and banking, we see a Nigeria and indeed a rapidly transforming West Africa with increased volume and value of insurable assets.
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