By Rosemary Onuoha

AS low insurance penetration continues to plague the country, depriving underwriters adequate pool of funds to improve on capacity to cover in-country high ticket risks, Nigerian insurers are now reinsuring more for adequate reinsurance backings.

Reinsurance offers protection in the areas of aviation, oil and gas, life and health, fire, accident, engineering, motor, marine hull, and marine cargo.

A breakdown of companies’ financials for the nine months period ended September 2017 show that while industry gross premium income went up marginally by 3.5 percent, to N140.2billion against N135.4 in the corresponding period of 2016, re-insurance expenses galloped by 156.8 percent to N96.3 billion from N37.5 billion recorded in 2016.

Although stakeholders are of the opinion that the insurance industry was the worst hit when the country was undergoing recession, they believe the government has a huge role to play to ensure huge risks are retained in the country, thereby improving underwriting capacity.

Stakeholders believe that with government complying with the compulsory insurances and subsequently compelling the citizens to do same will greatly improve capacity in the insurance sector.

Companies’ performances

Analysis of insurance companies’ financial results for the period under review show that for Niger Insurance, though gross premium income went up significantly by 54.3 percent to N7.1 billion from N4.6 billion, re-insurance expenses outpaced it by massively recording 429.1 percent increase at N2.0 billion from a deficit of N378,006, million.

Sovereign Trust Insurance gross premium income went up by 46.9 percent to N7.2 billion from N4.9 billion, but its re-insurance expenses still inched higher, rising by 94.7 percent to N3.7 billion from N1.9 billion.

For Axa Mansard, where gross premium income went up by 21.8 percent at N16.2 billion against N13.3 billion, the re-insurance expenses shot higher, rising 37.3 percent to N9.2 billion from N6.7 billion.

Law Union and Rock Insurance gross premium income inched up by 13.8 percent to N3.3 billion from N2.9 billion, but its re-insurance expenses went up higher by 50.2 percent at N1.4 billion from N932,858 million.

Custodian and Allied gross premium income increased by 13.5 percent to N23.5 billion from N20.7 billion, its re-insurance expenses climbed higher by 38 percent to N9.8 billion from N7.1 billion.

Royal Exchange Assurance recorded a moderate 9 percent growth in gross premium income at N10.4 billion against N9.4 billion, its re-insurance expenses went up by 31 per cent at N4.7 billion against N3.2 billion.

Cornerstone Insurance gross premium income grew marginally by 3.6 percent to N5.7 billion from N5.5 billion, but the re-insurance expense increased by 15.7 percent to N2.2 billion from N1.9 billion.

Declining Gross Premium

African Alliance gross premium income for the period declined by a whopping 66.1 percent to N4.2 billion from N12.4 billion of the preceding year, its re-insurance expenses rose massively by 1819.2 percent to N49.9 million from  N2.6 million.

Prestige Assurance gross premium income dropped by 31.6 percent to N2.5 billion from N1.9 billion, but its re-insurance expenses still shot up by 27.3 percent to N1.4 billion from N1.1 billion.

Linkage Assurance gross premium income declined marginally by 3.1 percent to N3.1 billion from N3.2 billion, the re-insurance expenses shot up by 21.5 percent to N1.1 billion from N905,992 million.

Re-insurance expenses

AIICO Insurance gross premium income declined by 9.9 percent to N17.3 billion from N19.2 billion, its re-insurance expenses, however, went up by 8.0 percent to N2.7 billion from N2.5 billion.

Mutual Benefits’ gross premium income declined by 3.7 percent to N5.2 billion from N5.4 billion, but the reinsurance expenses inched up 2.3 per cent to N685,217 million from N669,658 million.

But the re-insurance subsector was not different from the trend in the industry as Continental Reinsurance Company’s premium revenue went up by 15 per cent to N21.4 billion from N18.1 billion, while insurance premium ceded to retrocessionaires shot up by 36 per cent to N3.0 billion from N1.9 billion.

Better income to re-insurance expenses

Equity Assurance Company’s gross premium income went down significantly by 33.3 percent to N1.6 billion from N2.4 billion, the re-insurance expenses also nosedived but by a massive 34.6 percent to N323,454 million from N494,565 million.

For Consolidated Hallmark, gross premium income declined by 10.1 per cent to N4.4 billion from N4.9 billion, re-insurance expenses also went down by 25 per cent to N1.5 billion from N2.0 billion.

Regency Alliance gross premium income declined by 8.3 percent to N2.2 billion from N2.4 billion, re-insurance expenses also dipped by 18.2 percent to N618,041 million from N755,764 million.

Lasaco Assurance gross premium income climbed up by 16.7 percent to N4.9 billion from N4.2 billion, however, re-insurance expenses declined by 16 per cent to N2.1 billion from N2.5 billion.

Companies with 2016 results

For Leadway Assurance Company Limited, gross premium income for December 2016 went up marginally by 4 per cent to N53.7 billion from N51.1 billion, however, reinsurance expenses climbed by 10 per cent to N12.4 billion from N11.1 billion.

Nem insurance gross premium income for December 2016 declined by 0.9 per cent to N10.6 billion from N10.7 billion, while reinsurance expenses went up marginally by 4 per cent to N2.1 billion from N2.2 billion.

Operators’ reaction

Former President of the Nigerian Council of Registered Insurance Brokers, Barr. Laide Osijo, said that before ceding risks to re-insurers, the direct underwriters must have exhausted their retention limit. It is when they don’t have capacity of taking up more risks that they retrocede to reinsurers.

Osijo stated: “Re-insurers take bulk of the premium when the risk is very hazardous like in oil and gas where the Nigerian market doesn’t have enough capacity, so they retrocede abroad.

“However, before the retrocession, they must have gotten approval from the National Insurance Commission, NAICOM, to retrocede abroad and that happens mostly in hazardous risks like oil and gas, aviation risk, as well as marine insurance. Sometimes though, underwriters try to take up businesses on co-insurance basis,” she said.

An operator who spoke on the condition of anonymity stated that with the  volume of premium going out of the coffers of insurers  it means that some of them are just like intermediaries retaining very little and just relying on the little commission from re-insurers.

He stated: “For ceding business to re-insurers, underwriters are entitled to some commission. But basically the implication is that your retention capacity is low and it implies capital flight.

Retaining more risks locally

On how to retain more risks locally, Osijo noted that government have a huge role to play. She however, stated: “The poor image of the insurance sector is not too good enough for us to generate proper income as required. We still need government assistance in the areas of compulsory insurances.”

The operator who pleaded anonymity stated: “The industry needs to build capacity but government needs to come in. When you talk of big risks like aviation, oil and gas, sometimes what is retained is so minimal that many of the insurance companies become like insurance brokers who are just collecting commission which is just a little percentage.

“Government should give the insurance companies funds in form of loans to help build capacity. The government should give the companies a long period of time to return the money. So at the end of the day, it will not be some fund that you just gave the insurance industry and the money filters away. If that is done, some of these businesses that are being ceded abroad will be retained locally because capacity will greatly improve.

“Most technical and high volume risks are being ceded abroad.   Imagine an airplane insured in Nigeria crashing, the loss will wipe off the entire industry capital.

“However, this goes beyond just increasing capital base or the risked base supervision that NAICOM wants to introduce into the industry. Good as it is, the industry simply needs government intervention.”