A.M. Best Special Report Examines Nigeria Insurance Market Trends

LONDON--()--Economic development and the demand for energy infrastructure projects has been fuelled by Nigeria’s oil and gas industry, resulting in the country’s insurance market becoming the largest in West Africa, according to a new report from A.M. Best Co.

In the report entitled, “Africa’s Diverse Insurance Markets Offer Growth Opportunities, Untapped Demand”, A.M. Best notes total insurance premium in Nigeria reached USD 1.6 billion in 2011, although insurance penetration is modest at 0.6%. The report states the Pension Reform Act, which makes pension insurance compulsory for companies employing more than five people, is likely to drive further growth in life premiums. A.M. Best considers the development of the life portfolio in Nigeria as positive for insurers’ diversification, although management teams may need to demonstrate their skills in these new areas.

Carlos Wong-Fupuy, Senior Director, Analytics, said: “Nigeria’s non-life sector accounted for 74% of total premium in 2011, with drivers including the enforcement of compulsory lines of business such as motor third-party liability, professional indemnity, public and general liability. Motor risks make up more than a quarter of non-life premium in Nigeria. This reflects the country’s oil and gas risks, which result in very volatile growth in gross premiums written and low retention ratios.”

The report notes the insurance market has experienced consolidation driven primarily by higher capital requirements. The financial crisis also contributed to merger and acquisition activity, as the Central Bank of Nigeria passed a directive ordering all deposit money banks to divest their non-banking interests or form a holding company structure. However, the report states Nigeria’s insurance market remains crowded.

Yvette Essen, report author and Director of Industry Research, Europe & Emerging Markets, said: “There is still potential for further consolidation. Nigeria’s insurance market remains fragmented, with only two non-life companies maintaining market shares of more than 10%. The small size of companies and the nature of the risks underwritten can lead to relatively high and volatile expense ratios.”

To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=208535.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best Co.
Carlos Wong-Fupuy, +(44) 20 7397 0287
Senior Director, Analytics
carlos.wong-fupuy@ambest.com
or
Yvette Essen, +(44) 20 7397 0322
Director, Industry Research
Europe & Emerging Markets
yvette.essen@ambest.com
or
Edem Kuenyehia, +(44) 20 7397 0280
Associate Director, Market Development & Communications
edem.kuenyehia@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best Co.
Carlos Wong-Fupuy, +(44) 20 7397 0287
Senior Director, Analytics
carlos.wong-fupuy@ambest.com
or
Yvette Essen, +(44) 20 7397 0322
Director, Industry Research
Europe & Emerging Markets
yvette.essen@ambest.com
or
Edem Kuenyehia, +(44) 20 7397 0280
Associate Director, Market Development & Communications
edem.kuenyehia@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com