The international credit rating agency, Fitch Ratings, has announced that the Nigerian insurance market will return to real gross premium (GWP) growth in 2018, as favorable fundamentals support the long-term development of the sector.
“The fundamentals of Nigerian insurance remain favorable. There is strong potential for economic growth, a young population with a growing middle class, investor interest and low insurance penetration. Growth has been slowed by recent economic decline and significant structural challenges, but there is also a generally skeptical population about the benefits of insurance, “said Fitch Ratings.
In the agency’s report, it is noted that Nigeria’s insurance industry fell in 2016 due to high inflation that produced moderate nominal GDP growth.
Also, Fitch believes that the local insurance market will benefit from an additional scale. Consolidation and technological improvements could lead to lower operating costs, and insurers who manage to reduce costs could gain market share by offering consumers better quality products.
A new round of capitalization is possible as several insurers have already announced their intention to raise additional funds. For good reason, a new risk-based supervisory regime is being implemented by the regulator as part of a gradual shift to a Solvency II type regime in Nigeria.
