The Minister of Finance, Kemi Adeosun on Monday expressed the determination of the current administration to lead in the reforms of a more vibrant Nigeria insurance market.
The Minister in her opening remarks at the National Insurance Conference in Abuja, explained that a developed and active insurance market would bring about increase in GDP, accumulation of long-term funds for infrastructural financing, job creation, and an improved standard of living.
She added that the development would also attract foreign investment into our country.
Speaking on the ongoing efforts of industry stakeholders to reposition the insurance industry for growth, the Minister said the Federal Government was ready to lend its support, saying “There is a need to immediately address the decline in the Nigerian Insurance Industry as it is lagging behind global and African peers.
“Despite being the largest economy in Africa, the Nigerian insurance industry remains largely underdeveloped. The industry has under-performed the Banking sector and even the recently established Pensions sector.”
Emphasising the resolve of the Federal Government to stimulate extra-ordinary growth and unleash the potential of the insurance industry in Nigeria, Adeosun listed some factors necessary for the change.
These, among others include the needs to “Recognise our true stage of development- we are an industry that despite its age remains in its infancy. This means that Government must act as a nurturer and incubator of the industry.
“We have also seen the success of the pension fund industry as a text book example of where government policy set clear parameters for participation, led by example and enforced legal obligations.
“If we are to use the Pension fund success story as a template for the Insurance Industry, then we can jointly identify the required road map.
She also stressed the need to strengthen the capital base of insurance companies.”
She recalled that in 1981, the minimum capital requirement for banks was N1million while that of composite insurance companies was N0.8 million. By 2014 Banks had grown theirs to N25 billion and Composite Insurance Companies to N5 billion showing that Banks had grown capital requirements 8x faster.
“The industry needs to recapitalise. Capital levels were last raised in 2007. To take true advantage of the opportunity for the industry we must recapitalise and reposition. The top three banks have capital in excess of N300 billion each! The top three insurers have capital of between N14 billion to N25 billion.
“The insurance sector needs to raise minimum capital requirements in a manner that is comparative to what happened to the banking sector in the last two to three decades. Increased capital will provide funding for publicity and product development.
“It will raise the clout of insurance companies in policy formulation and will enhance our capacity to hire the best people and deploy the technology and marketing, product awareness and investment needed to support the industry.”
According to her, the current administration firmly believes that the economy has only one direction to move in and that is upwards as true change means doing things differently with the full expectation of different outcomes.
“Our confidence in the future of our economy is not based on the statistics that have consistently detailed its potential but rather the deliberate policies and actions that will ensure a robust and sustainable recovery.
“Our economic focus is built on pursuing a disciplined approach to our financial management, reducing the cost of governance and increasing its impact. This is being attained by efforts to maximise revenues and minimise leakages through corruption, waste and inefficiency. This will release the headroom needed to fund our essential infrastructure, which will in turn lead to the increased growth of the non-oil sector and a more diversified revenue base.
“Our days of reliance on oil as a principal source of revenue must be put firmly in our nation’s economic history. That process of adjustment is painful but like “good medicine” is the only effective cure.”
She said a key element of the enabling environment is the de-risking provided by the insurance industry.
Quoting NIA sources, the Minister said that Nigeria with a penetration of 0.3% recorded total industry Gross Written Premium (GPW) of N350 billion in 2015.
“If we collectively set a 7-year target of achieving Africa’s average penetration of 3.5%, we can transform our industry into one with GWP of N4.5 trillion by 2023.
“To achieve this, the industry will have to grow at a Compound Annual Growth Rate (CAGR) of 44% from 2017 to 2023. This is in no way an impossible target and in fact represents the type of ambitious objectives we need to set for ourselves as several sectors in Nigeria including Telecoms, Banking and Pensions Management have been able to record such impressive growth through the collective support of all stakeholders.
“It is also consistent with the Change mandate of His Excellency President Muhammadu Buhari. We have no reason to be different.”
She reiterated the need to act urgently, as the development of the Nigerian insurance industry will come with other attendant benefits that are critical to achieve the type of growth and change for the economy and for the large number of Nigerians who have been deprived of the financial stability, protection and business growth that developed insurance markets have provided for their citizens for centuries. All successful economies are characterized by a strong investment culture of which insurance plays a key role.
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