Insurers’ Assets To Grow By 26.5% – Agusto&Co

 

The Pan African Credit Rating Agency and industry research, Agusto&Co, has predicted a 26.5% growth for the Nigerian insurance sector this year.

Agusto&Co stated this in its highlights on the 2020 insurance industry report, explaining the insurance outlook for 2020.

While emphasizing on the report, the agency said there would be a decline in the total number of operators due to the recapitalization exercise.

“We envisage a significant reduction in the total number of players by at least 50%. We anticipate a 26.5% growth in total assets between now and 2020.”

“We expect marginal improvement in the near term and significant growth in the medium term on the back of the recapitalization. However, the fragile macroeconomic environment remains a constraint.” the report states

The report also stated that the gross premium income of the sector would be driven by improved operating climate, regulatory support, recapitalization exercise and awareness, and  life business including oil and gas business

However, the Inflation adjusted GPI showed a five- year average decline of 1.2% which means the industry’s underwriting profit margins had been impacted by GPI growth, policy pricing, claim payments, reinsurance (inadequate capacity), acquisition and maintenance costs.

In the same vein, the motor business line remained the most profitable with an underwriting margin of 45.1%, while annuities were least profitable.

Similarly, the money market securities recorded over 68% of the industry’s investment portfolio, while approximately 12% were in real estate.

However, it added that in 2018 and 2019, lower returns were due to the Central Bank of Nigeria’s monetary policies.

The report stated; “Return on equity remained lower than the return on 365-day treasury certificates of 13.9% and the banking industry’s estimated ROE of 22.9% in 2019,” it stated.

Hence, the report emphasized that the retrogressive record has made equity investors shun the industry and are in need of additional capital to increase its underwriting capacity.