By ROSEMARY ONUOHA
After the close of consolidation in the insurance sector, some companies went abroad to establish branches. The success of these foreign investments still leaves a lot to be desired

At the last count, a total of seven Nigerian insurance companies established branches in some African countries after their capital base were beefed up as a result of the consolidation that took place in the sector in 2005.

A few of the companies that have crossed the borders are Industrial & General Insurance Plc; Law Union & Rock Plc; Mutual Benefits Assurance; Regency Alliance; Standard Alliance Plc; Capital Express as well as Continental Reinsurance Plc.

Vanguard investigations show that Regency Alliance Insurance Plc noted that the establishment of a subsidiary of the company in Ghana marked the beginning of its strategic expansion across countries in West and East Africa.

Ghana has 22 insurance companies and less than 45 insurance brokers. It’s relatively a small market compared to Nigeria and currently, the whole industry gross premium income is in the range of $250 million.

Capital Express Insurance Limited on the other hand acquired three life insurance companies in the West African Region, stating that the move is in line with its strategy of pursuing a development plan for its domestic business and implementing a phased international expansion programme.

Continental Reinsurance Plc (C-Re) which has a regional office in Cameroon opened another one in Nairobi, Kenya in line with its drive to spread its network across the globe.

Law Union & Rock Insurance Plc reiterated that the west coast marketing plan is part of a multi-pronged strategy to dramatically increase earnings and take the insurer to the top five brackets in the industry while for Mutual Benefits Assurance; Liberia was the country of appeal.

Most of the countries which these companies ventured into are smaller than Nigeria economically and population wise, and the matter is made worse as shareholders of these Nigerian firms that have gone offshore to establish these branches  don’t have any idea about the success or otherwise of the businesses since there is no consolidated account to that effect.

Even the regulator of insurance practice in Nigeria, the National Insurance Commission, NAICOM, is in the dark as to the operations of these foreign branches, as according to the Commissioner for Insurance, Mr. Fola Daniel “It is difficult for me to say if the companies are successful because we are not operating on the basis of consolidated balance sheet.”

“When you said the balance sheet of an insurance company is consolidated, it means that the businesses of the company in Rwanda, Ghana and other places will reflect in the same books. You can look at the books and say this is how much each subsidiary or branch is contributing.”

Since the performance of these offshore firms cannot be measured by the shareholders of the companies, stakeholders are beginning to question the rationale for operating offshore branches. Moreover since Nigerian market still offers huge untapped opportunities, there is the recurring argument that the home front should be developed first.

Managing Director of Guinea Insurance Plc, Mr. Soji Emiola, stated that Nigerian insurers have not tapped the local market adequately, adding “We still need to do a lot of things here in Nigeria.”

According to him, the regulator of insurance practice in the country needs to set a hurdle for those that have ventured or have intention of venturing abroad.”

Emiola wondered what level of gross premium income that insurers venturing into smaller African countries intend to write in a market of such small size, stressing “So we need to develop this market.”

Corroborating the view of Emiola was Daniel who reiterated that he has a personal opinion on Nigerian companies going to establish abroad, stating “I believe many of our companies are chasing shadows because some of the countries they went to establish subsidiaries do not have insurable interest as big as what you can find in Surulere Local Government alone.

For instance, Zambia has a population of 1.3 million and if you add people who are staying in Zambia illegally you will still have less than 1.5 million people that are the entire population.  If you then look at the adult population who can take one form of insurance or the other, usually this will be less than one-third of that 1.5 population. So we are looking at about 500,000 people buying insurance products.

Mr. Yemi Soladoye, an industry expert stated that for every one insurance outfit opened outside the country, four new branches should have been opened in Nigeria, adding that the trend where Nigerian insurance companies are going offshore to establish subsidiaries and neglecting the home front will not augur well for the industry.

Reiterating that necessary research must be carried out before crossing the borders, Soladoye maintained that charity must start from home.

However, Mr. Wale Onaolapo, managing director of Sovereign Trust Insurance Plc posited that venturing out is not entirely a bad idea but that the local market still offers a lot of potentials to be tapped. And for his company it is not seen as a priority or a means to an end the way other companies are going about it since there is a huge market potential yet to be exploited here in Nigeria.

Because the Nigeria insurance industry is plagued with a very poor and negative perception, Soladoye charged the firms with investments there to be careful since these countries though small economically are more organised than Nigeria and a single flop could impact greatly on the image of the industry and the country at large.

The way forward

NAICOM has said that perhaps it might state henceforth that underwriters with offshore investments will give it the financials of activities outside Nigeria, so that it can truly see what the impact is.

According to Daniel, “The unofficial position we are taking is that if any company is seeking approval to go to Ghana or so now, we want to know how many branches it has opened in Nigeria first.  If we are saying we need to deepen insurance in Nigeria we cannot deepen insurance in Nigeria by going to Ghana.

I will be interested if you are saying that you want to open 10 more branches across Nigeria.  It is not in our guidelines but I am sure we are going to take that kind of reasonable posture.  We are not going to say no to your going to Ghana but go and open 5 or 6 more branches let us see them work.

Experts believe that if the regulator can bring this to bear, then it will be a positive signal for better days ahead.