Kemi Adeosun, minister of finance, says Nigeria must recapitalise its insurance sector just the way banks were recapitalised to drive effectiveness.
Speaking at the National Insurance Conference in Abuja on Monday, Adeosun said the current administration is resolute in leading reforms for a more vibrant Nigeria insurance market.
She explained that a developed and active insurance market would bring about increase in GDP, accumulation of long-term funds for infrastructural financing, job creation, and an improved standard of living.
“There is a need to immediately address the decline in the Nigerian Insurance Industry as it is lagging behind global and African peers,” she said.
“Despite being the largest economy in Africa, the Nigerian insurance industry remains largely underdeveloped. The industry has under-performed the Banking sector and even the recently established Pensions sector.
She said based on the success Nigeria achieved in the pension sector, it is possible to achieve similar success by strengthening the capital base of insurance companies.
She said in 1981, the minimum capital requirement for banks was N1million while that of composite insurance companies was N0.8 million.
By 2014, banks had grown theirs to N25 billion and composite insurance companies to N5 billion, showing that banks had grown capital requirements eight times faster.
“The industry needs to recapitalise. Capital levels were last raised in 2007. To take true advantage of the opportunity for the industry we must recapitalise and re-position.
“The top 3 banks have capital in excess of N300 billion each! The top 3 insurers have capital of between N14 billion to N25 billion.
“The insurance sector needs to raise minimum capital requirements in a manner that is comparative to what happened to the banking sector in the last two to three decades.
“Increased capital will provide funding for publicity and product development. It will raise the clout of insurance companies in policy formulation and will enhance our capacity to hire the best people and deploy the technology and marketing, product awareness and investment needed to support the industry.”
She said the current administration firmly believes that the economy has only one direction to move in and that is upwards, as true change means doing things differently with the full expectation of different outcomes.
“Our confidence in the future of our economy is not based on the statistics that have consistently detailed its potential but rather the deliberate policies and actions that will ensure a robust and sustainable recovery.
“Our days of reliance on oil as a principal source of revenue must be put firmly in our nation’s economic history. That process of adjustment is painful but like ‘good medicine’ is the only effective cure.”
Adeosun said 0.3percent insurance penetration recorded total industry Gross Written Premium (GPW) of N350 billion in 2015.
“If we collectively set a 7-year target of achieving Africa’s average penetration of 3.5%, we can transform our industry into one with GWP of N4.5 trillion by 2023,” Adeosun concluded.