Nigeria's substantial oil and gas reserves, its young and growing population and its position as Africa's largest economy continue to point to significant development potential for its insurance sector, notes AM Best.
However, Nigeria has failed to deliver on that potential historically due in part to the volatility of growth in the country's real gross domestic product (GDP), coupled with the sporadic enforcement of mandatory retail insurance lines, the international credit rating agency adds.
In a new Best's Market Segment Report, "Nigeria’s Insurance Market Offers Significant Potential Despite Headwinds", AM Best notes that, due to the COVID-19-driven economic slowdown, the insurance market regulator National Insurance Commission (NAICOM) has agreed to further delay its revised plans to strengthen market capitalisation and limit the volume of premium flowing out of the country.
NAICOM has now opted for a staggered approach that requires partial recapitalisation by December 2020, with market participants obliged to meet the full requirements by September 2021.
AM Best believes that a material proportion of (re)insurers will find it challenging to raise sufficient additional capital to meet the new standards. It estimates that only one fifth of Nigerian (re)insurers at year-end 2018 had sufficient capital and surplus to cover the new requirements. In addition, more than 10 companies will have to double their reported 2018 year-end capital and surplus figures to meet the requirements.