By Yinka Bolanrinwa
BY now, readers of this column will have noticed that I keep coming back to the issue of MDRI in the last few editions of the column. If we are not done with it, then we are not done; pardon me. I will now share with you, my readers, excerpts from the Afrinvest 2011 Insurance Sector Report titled Trotting at the Pace of Reforms.

That report dealt with many issues; but as it concerns our immediate environment — Nigeria — it focuses reform-driven expansion in the industry; the re-growing of premium, dominance of the revenue base by non-life insurance products. It is capped with a SWOT analysis of the sector, which I will bring to you later.

Why MDRI

Recall that in 2008, NAICOM introduced the Market Development and Restructuring Initiative (MDRI), a medium term reform plan (covering 2009 to 2012), targeted at  enhancing industry capacity, market efficiency and consumer protection in the Nigerian insurance market space.

NAICOM expects the initiative to deepen and grow  the insurance market, moving industry gross premiums from N164bn (US$1.1bn) in 2008 to N1.0t r (US$6.4bn) in 2012. MDR focuses on four key issues: the  enforcement of compulsory insurance products in Nigeria, sanitization and modernization of insurance agency System, wiping out fake insurance institutions and the introduction of Risk-Based Supervision.

The core focus of the MDRI is to enforce compulsory insurance covering six areas, which include Group Life Insurance, Employers Liability Insurance, Buildings under  construction, Occupiers Liability Insurance, Motor Third Party Insurance, Healthcare professional and indemnity insurance.

Although, compulsory insurance has  become a major tool for growing the penetration rate in the industry, failure in enforcing previous policies have cast a doubt on the ability of regulators to push through  current reforms in this direct ion.

That said, we think recent commitments by NAICOM and increased levels of awareness could buoy premium expansion in the medium  term. With the official March 2009 kick-off date, we look to see the full impact of this policy on insurers’ books from 2012.

Reform-driven expansion

The Nigerian Insurance market has undergone substantial st ructural and regulatory changes following market intervention and the evolution of Nigeria’s financial  sector in the last decade. From a largely fragmented operating environment characterized by a weak and almost non-existent regulatory framework, the industry  consists of 49 players (down from 104 in 2006, prior to the consolidation in the industry).

The cont ract ion in the number of industry players has led to improved capacity not only for higher underwriting, but also the ability to settle larger claims.

The consolidation in the industry brought about the emergence of larger insurance firms with technical capabilities to take advantage of economies of scale. Industry market capitalization rose to N278.4bn from a pre-consolidation level of N73.7bn. Further, complementary reforms, especially in the banking sector, has also aided the  growth of the industry as the introduction of universal banking led banks to diversify into the insurance business terrain; a trend that helped boost premium growth in  the sector.