By ROSEMARY ONUOHA
The cost of insecurity in Nigeria is turning out to be very expensive. It is estimated that over N1 trillion has been spent by individuals and the various arms of government on ransoms, compensations, upgrade of security apparatus and personnel since the advent of kidnapping and Boko Haram in the country.

Despite the various measures being put in place to combat the security challenges, the menace of Boko Haram and kidnapping is daily assuming a frightening dimension to the point that the level of confidence on the security outfits in the country is gradually assuming a declining trend.

With the confidence level on the country’s security outfits almost at zero level, there are permutations that this confidence should be shifted to the insurance industry, which is a risk carrying sector. However, observers are worried and are asking if the insurance sector has the capacity to carry risks associated with Boko Haram and kidnapping.

According to experts while the Nigerian insurance industry is lagging behind globally with total insurance premium of about N1.3 billion a single insurance company in America has premium of more than 250 billion dollars. Consequently, the readiness or otherwise of the sector to cover security risks has continue to be a topic for debate.

The debate

Wondering why the insurance industry is yet to come up with a cover for security risks, former Managing Director of Financial Institutions Training Centre (FITC), Mr. Oladimeji Alo, said that this is a good time for insurers to create one.

According to him, it appears insurance operators don’t understand the Nigerian environment well  because if they do, there is no better time than now to have such insurance policy in place.

Alo said “A sound understanding of the environment should propel insurers to create such policy to guard against severe losses from terrorism or kidnapping.

However, other experts are of the opinion that Alo may be the one that does not really understand the Nigerian situation.

For Chairman of Nigerian Insurers Association, NIA, and Managing Director of Lasaco Assurance Plc, Mr. Olusola Ladipo-Ajayi the Nigerian situation is a peculiar one as even the government has refused to take up insurance against security risks.

Ladipo-Ajayi said “The federal government does not even buy terrorism insurance even in oil and gas. Where they have been offered, the federal government of Nigeria has not bought terrorism insurance. So we haven’t started doing terrorism insurance because it is very expensive.”

According to him, terrorism insurance is available in the international market but it doesn’t come very cheap, adding “And we have to buy the reinsurance backup to do it before we can start selling it.”

The NIA Chairman noted that pressure is on the insurance industry to create a policy for security risks because the issue of terrorism and Boko Haram is taking a new dimension and it appears that it won’t go away.

Ladipo-Ajayi, however, prayed that the current security challenges will pass away so that the industry will not have to bother about creating policies for the accompanying risks. “We just pray that this Boko Haram phase will pass by.

If it is persistent and people continue to look at the direction of insurance and we continue having enquiries from members of the public, then the insurance market will respond accordingly. But we don’t want to fish in troubled waters; we don’t want to promote it because when we do, we are saying that this Boko Haram thing will never go away. We don’t want to do that,” he said.

For former Director of Retail Operations of Guaranty Trust Assurance Plc, Mr. Salami Owolabi, despite the fact that kidnapping is an insurable risk, the insurance industry is not in a position to create insurance cover for risks or loss associated with kidnapping.

Owolabi noted that for kidnap policy to succeed it needs to have large number of buyers so that there can be a pool of funds from which claims can be adequately and promptly settled.

He said “Many people are not keen to buy kidnap cover, pricing the product might be very expensive and the cost of mitigating the loss will be very prohibitive to individuals that require it, thereby scaring people away.”

The way forward

No doubt, the security challenge in the country has become an issue of concern for all. But while the security agencies are still finding a way to reduce the menace, it is generally agreed that the government has to top up its game.

In order to drastically reduce the menace of kidnapping, Owolabi charged the Nigerian government to sit up to their responsibility of providing security for all. According to him, government should create a conducive economic and regulatory environment while curbing the recklessness of certain actors in the economy.