Nigerian insurance premiums will increase fourfold over the next five years as companies from Old Mutual Plc to Sanlam Ltd. tap an acceleration in economic growth in Africa’s most populous nation.
Premiums will grow to more than 1 trillion naira ($6.3 billion) from 260 billion naira in 2012, said Fola Daniel, chief executive officer of the the Abuja-based National Insurance Commission of Nigeria.
Life insurance is a “huge growth opportunity” in Africa’s biggest oil producer as Nigeria starts enforcing a 2004 rule making coverage compulsory for employers with five or more staff, said the regulator’s head of strategy, Babajide Oniwinde. That helped attract investment by London-based Old Mutual and Sanlam of South Africa as the policing of mandatory auto and building insurance further increased the market’s appeal.
“Many assets used in the country are not insured,” Bismarck Rewane, CEO of Lagos-based investment adviser Financial Derivatives Co., said by phone. “South Africa happens to have a very mature insurance market, so it’s not a surprise investors are coming from there.”
Old Mutual’s acquisition of a majority stake in Oceanic Life, a unit of Ecobank Transnational Inc., was approved in March, while Sanlam bought a minority of FBN Holdings Plc life business in 2010. NSIA Participations SA Holdings, based in Ivory Coast, acquired a majority of ADIC Insurance Ltd., a unit of Diamond Bank Plc and Assur Africa Holding, a group of European development finance institutions, purchased GTAssurance Plc, before changing its name to Mansard Insurance Plc.
Nigeria’s regulator oversaw industry reform after the global financial crisis in 2008 and 2009 brought the banking industry and stock market in Africa’s biggest oil producer to the verge of collapse. Foreign investors can own 100 percent of Nigerian insurers, while the enforcement of compulsory policies is improving cash flow for companies, Oniwinde said.
“There is a growing middle class and increasing number of high net worth individuals who would need insurance for their valuable assets,” Oniwinde said.
Premiums rose 12 percent last year from 233 billion naira in 2011, according to the regulator known as Naicom. That’s far short of developed markets. Switzerland, a country of 8 million people, had insurance premiums 38 times higher than Nigeria last year.
Nigeria’s 59 insurers, led by Leadway Assurance Plc and AIICO Insurance Plc, had total assets of 564 billion naira, according to the regulator.
Further premiums gains will be “driven by the anticipated strong growth in the economy, a significantly untapped insurance market and growth in the emerging middle class,” Margaret Dawes, executive director for Rest of Africa Operations at Cape Town-based Sanlam, said in e-mailed response to questions.
Nigeria’s economy, the continent’s biggest after South Africa, may expand 6.75 percent next year, compared with an estimate of 6.5 percent in 2013, Finance Minister Ngozi Okonjo-Iweala said Oct. 11.
“The economy is witnessing a significant level of growth, with a lot of companies springing up and needing insurance,” Sewa Wusu, an analyst at Sterling Capital Ltd. in Lagos, said in an interview. “The regulatory environment has also improved, making investors eager to come in to take up the risk.”