Recently, the National Insurance Commission (NAICOM) as a part of its drive to engender growth in the Nigerian Insurance Industry issued the Corporate Governance Guidelines (CGG) for Insurers and Reinsurers in 2021. Coming alongside the recapitalization exercise that commenced in May 2019 and is expected to end in September 2021, the CGG is expected to foster order in the management of insurance/reinsurance firms in alignment with the Nigerian Corporate Governance Code of 2018.
The Nigerian Insurance Industry continues to lag its Sub-saharan African peers with an estimated insurance penetration of only 0.32% as of December 2020 compared with 0.62%, 0.41%, and 5.80% in Kenya, Ghana, and South Africa respectively. The need to improve on this low penetration level has given rise to many interventions; from the introduction of Market Development and Restructuring Initiative (MDRI) in 2011, the implementation of uniform premium regime, revised guidelines on grouplife insurance for employees, introduction of Micro Insurance, recapitalization of the sector, and now the issuance of the Corporate Governance Guideline.
While we laud these initiatives, we note that the continuous eroding purchasing power and the dip in household income constitutes a major downside risk to Insurance business in Nigeria. To put it in context, c. 92.0% of Insurance businesses in Nigeria are driven by corporates and high networth individuals in the country. This low level of retail penetration can be explained by various factors such as low level of awareness, absence of strong financial literacy across a large part of the population and the low level of economic growth in recent years which continues to affect both demand for insurance and the value of assets to be insured. In our view, the stakeholders in the industry would need to come up with products tailored to the needs of the middle and low income earners in addition to policies aimed at strengthening insurance providers.