By Rosemary Iwunze

As the Nigerian insurance sector continues to occupy 63-position globally, stakeholders are calling for mergers and acquisitions in the sector to consolidate the influence of companies as well as deepen insurance penetration.

In a report by Afrinvest, an investment and research firm, titled “Recapitalisation – launching into the deep”, the company also called for the resumption of the recapitalisation exercise.

According to the report released over the weekend, Afrinvest said: “We continue to advocate for increased mergers and acquisitions in the sector to consolidate the influence of companies, deepen insurance penetration and enhance the retention of heavy-ticket risks in Nigeria.

“We also advise increased collaboration with telecommunication companies and banks as well as micro-insurance to capture value at the retail end of the population.”

The report noted that coming from the stunted growth recorded since it contracted 2.9 per cent in 2019, the Nigerian insurance sector recorded a negative 15.3 per cent growth in 2020 according to the National Bureau of Statistics.

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“In terms of global relevance, the Nigerian insurance sector lagged significantly with a total contribution to global premiums at 0.03 per cent as it ranks 63rd of 88 countries profiled by Sigma Research in 2019.

“Compared with Sub-Saharan peers, the narrative is similar; the sector’s insurance penetration (GPW/GDP) remains poor at 0.3 per cent with South Africa (13.4 per cent), Morocco (3.9 per cent), and Kenya (2.3 per cent) advancing in reach. Similarly, the sector grapples with low insurance density (GPW per capita) of $8.0 compared with South Africa ($803.0), Morocco ($127.0), and Kenya ($43.0).

“In December 2020, Nigerian lawmakers in the House of Representatives directed the regulator to suspend the phased recapitalisation program, citing the economic hardship in the country as a result of the pandemic and the need for increased liquidity to boost growth.

“The lawmakers also alluded to the #ENDSARS protest by the Nigerian youths and the negative impact that the destruction of several properties has inflicted on the insurers.

“This action creates a Déjà vu scenario relatable to 2018 when a class action by insurance companies’ shareholders resulted in NAICOM canceling a proposed Tier-based recapitalisation.

“We advocate that the recapitalisation of the industry remains crucial to replicate growth similar to the banking sector experience.”

Vanguard News Nigeria