By Ifeanyi Ugwuadu
Following Nigeria’s inclusion in United States ‘Terror List’, insurers fear that 2011 renewals may see reinsurers increasing prices on risks generated in Nigeria if the rating is not reversed.

Already before Nigeria made the terror watch list, Nigerian insurers are said to pay higher reinsurance rates for treaties at the international market as a result of poor country risk rating by major rating agencies.

Chief executive officer of FBN Insurance Brokers, a subsidiary of First Bank, Val Ojumah described the attempted bombing of a US-bound airline on December 25, 2009 by a Nigerian, Farouk Abdulmutallab which placed Nigeria on the spotlight on international terrorism as unfortunate and said reinsurers are bound to respond to the country’s listing on terror watch list.

But he declared that the local insurance market is lucky to have concluded reinsurance arrangements before the action and US declaration. For those who may not have renewed their treaties, they may have additional burden of paying more on aviation policies, he noted.

Ojumah feared that the current status of Nigeria on terrorism has worsens the unfavourable rating of the country in world’s insurance market and if not reversed, insurers may eventually pay higher on same risk than those emanating from less volatile areas.

Consequently, he sees insurance buyers, corporate consumers paying more for their risks if the situation is not reversed before 2011 renewals.  For businesses struggling in the face of global economic downturn, he predicts a cut on insurance expenses and under-insurance of risks.

Although he warned that local insurers should steer clear of terrorism, kidnap and ransom covers, he still believed a backlash from the new terrorism list could affect other businesses in spite of a separate market for it.

On his part, Mr Ken Aghoghovbia, regional director of Africa Re for West Africa said it was unlikely that US inclusion of Nigeria on terrorism watch list would have any impact on the insurance market as the cover is already an exclusion for most underwriters in the country and elsewhere. “We do not write it” he stated in a telephone chat with Vanguard.

Aghoghovbia, however said there is a special market that covers terrorism and such would not directly impact on the insurance market or pricing.

Nigeria does not enjoy a favourable rating by global rating agencies and as such pay higher premium on reinsurance treaties with international reinsurers. The country’s poor rating stems largely from restiveness in the Niger-Delta where revenue from oil is generated. Unstable political and economic conditions also contribute to the poor rating.