Nigerian insurance industry has been predicted to maintain a level of growth and expansion even in the face of recent economic headwinds and significant structural challenges.
Global rating agency, Fitch Ratings, said in a new report that the industry has experienced declining growth rates in recent years, albeit from a high base.
But it noted that a number of leading insurers have maintained strong premium and balance sheet growth over the past three years.
According to the report, favourable factors supporting the long-term development of the industry include robust demographic fundamentals, investor interest and low insurance penetration.
The report said, “Fitch agency expects recent naira weakness to present an opportunity for foreign investors by providing an affordable entry point, while the difficult operating environment may incentivise small under-capitalised insurers to consider a sale.”
Last year, Fitch said it believed the Nigerian insurance market was ripe for further consolidation as insurers sought to increase scale and investor interest developed.
Fitch expected foreign investors seeking an entry point to the market to continue to do so through acquisition of existing insurers or partnership with local banks.
It said due diligence would remain a challenge to the acquisition of existing insurers, despite improvements in corporate governance.
The rating agency believes that consolidation in the industry, combined with technological improvements in administration and distribution, could lead to a reduction in operational costs.
It said insurers that succeeded in reducing costs could rapidly gain market share by passing on most of the benefits to consumers.
The report said, “The insurance industry is poised to benefit from continued significant economic growth and favourable demographic factors in Nigeria.
“Moreover, insurance coverage is currently low with a weak insurance culture among consumers and market growth could be stimulated by improved consumer awareness and enforcement of minimum compulsory insurance cover as required by law”.

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