Redimensioning The Insurance Industry Contributions To The

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CHARTERED INSURANCE
INSTITUTE OF NIGERIA
2014 INTERNATIONAL
EDUCATION CONFERENCE
REDIMENSIONING THE INSURANCE
INDUSTRY CONTRIBUTIONS TO THE
NATIONAL ECONOMY
• Part 1: Overview of The Nigerian Economy
• Part 2: Review of The Insurance Sector
• Part 3: Repositioning The Insurance Sector
3
PART 1:
OVERVIEW OF THE NIGERIAN
ECONOMY
THE NIGERIA ECONOMY
• Nigeria is a relatively large economy with apparently
strong growth rates.
• GDP was recently rebased with GDP of N80.3 trillion
($509.9bn)
• The rebased GDP captured some new sectors notably
Telecommunications and Nollywood.
• Nigeria now ranks as the 26th biggest economy in the
world and is the largest economy in Africa.
• At least 25% bigger than South Africa ($408bn)
5
GDP OF SOME COUNTRIES ($BN)
COUNTRY
GDP
COUNTRY
GDP
COUNTRY
GDP
USA
14,991 Brazil
2,477
Nigeria
509
China
7,318
India
1,873
S.Africa
408
Japan
5,867
Russia
1,858
Egypt
230
Germany
3,601
Mexico
1,153
Algeria
189
France
2,773
Indonesia
847
Angola
104
UK
2,445
Turkey
775
Morocco
100
Italy
2,194
Saudi
Arabia
577
Ghana
39
Canada
1,736
Malaysia
288
Kenya
34
Norway
486
Ivory Coast
24
Singapore
240
Cameroun
25
Botswana
17
6
BUT THE STORY IS FAR FROM PLEASANT
• Nigeria is also an economy with major contradictions and
weaknesses despite its size
• The economy, in spite of its size, remains heavily dependent
on crude oil which accounts for more than 90% of exports
• Size means little without a high quality of life
• On a per capita basis, we are still a low income country with
GDP of just around $3,000
• There is significant inequality and very high poverty intensity
• Poverty and inequality will persist if corruption is not
addressed. Sadly, very little attention is being paid to
corruption.
7
TRANSPARENCY INTERNATIONAL
RATINGS
COUNTRY
Botswana
Namibia
Ghana
South Africa
Liberia
Nigeria
SCORE
65%
48%
45%
43%
41%
27%
GLOBAL RANKING
30th
58th
64th
69th
75th
139th
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POOR QUALITY OF LIFE
HEADCOUNT LIVING IN
ABSOLUTE POVERTY
(N6,000/MONTH)
South Africa
14%
Togo
28%
Senegal
30%
Ethiopia
31%
Uganda
38%
Nigeria
54%
Sub-Saharan
49%
Africa
Source: World Development
Reports; World Bank – 2008-2011
LIFE EXPECTANCY AT BIRTH
Ghana
64 years
Gabon
63 years
Senegal
59 years
Gambia
58 years
Togo
57 years
Benin
57 years
Niger
55 years
Burkina Faso
55 years
South Africa
55 years
Nigeria
52 years
9
10 WORST CITIES TO LIVE IN
CITY
LIVEABILITY SCORE %
RANKING
Damascus, Syria
38.4%
1st
Dhaka , Bangladesh
Lagos, Nigeria
Port Moresby, Papua NG
Harare, Zimbabwe
38.7%
38.9%
38.9%
39.4%
2nd
3rd
3rd
5th
Algiers, Algeria
40.9%
6th
Karachi, Pakistan
40.9%
6th
Tripoli, Libya
42.8%
8th
Douala, Cameroun
43.3%
9th
Teheran, Iran
45.8%
10th
SOURCE: INTERNATIONAL ECONOMIST
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HIGH GROWTH RATES HAVE NOT
DELIVERED HIGH QUALITY OF LIFE
YEAR
GDP GROWTH
RATE
2009
2010
2011
6.96%
7.98%
7.43%
2012
2013
2014
6.58%
6.50%
6.75%
• 2009-2012 (NBS)
• 2013 and 2014 : Budget
Office Projections
• In spite of healthy GDP
growth rates, poverty is
still pervasive
• 69% living below the
poverty line – NBS
estimates
• There
is
growing
realization that growth
has been happening
without inclusion.
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GDP (PPP)OF SOME COUNTRIES ($)
COUNTRY
GDP
COUNTRY
GDP
COUNTRY
GDP
USA
48,110 Brazil
11,640
Nigeria
2,964
China
7,319
3,650
S.Africa
10,960
Japan
33,670 Russia
21,920
Egypt
6,280
Germany
39,460 Mexico
16,590
Algeria
8,660
France
35,250 Indonesia
4,640
Angola
5,920
UK
35,600 Turkey
17,110
Morocco
4,950
Italy
32,670 Saudi
Arabia
24,270
Ghana
1,870
Canada
40,420 Malaysia
16,050
Kenya
1,710
Norway
60,390
Ivory Coast
1,790
Singapore
60,690
Cameroun
2,360
Botswana
14,750
India
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PART 2: REVIEW OF THE
INSURANCE SECTOR
Source: Swiss Re: World Ins Report 2013
14
INSURANCE PENETRATION
NIGERIA
ANGOLA
KENYA
S.AFRICA
2011
2012
2011
2012
2011
2012
2011
2012
Insurance
Penetration
0.6%
0.7%
1.1%
1.0%
3.2%
3.1%
12.9% 14.2%
Urban
Population
Growth
4.0%
4.0%
4.5%
4.4%
4.4%
4.4%
1.9%
1.9%
INSURANCE DENSITY
SWISS RE: WORLD INSURANCE REPORT 2013
16
Sector Profile (Institutional)
• The industry has a total of 57 underwriting
institutions comprising 16 life insurers, 30
non-life/general insurers and 11 composite
insurers.
• It also has an active secondary arm comprising
2 Actuaries, 54 Loss Adjusters, 569 Brokers
and 2,454 Registered Agents.
17
Sector Profile (Business Volumes)
• Gross Premiums have grown by 25% from 2008-2012
reaching N300bn in 2012
• However this is still way below the industry target of N1
trillion
• The industry was just 0.06% of GDP compared to its target
of 3% of GDP. It was 0.048% in 2008
• According to Mr. Fola Daniel, the Nigerian Insurance
Commissioner, only 800,000 adults have policies, a ratio of
0.48%
• Contribution to national economy is minimal
18
SECTOR PROFILE – CAPITAL MARKET
PERFORMANCE
• Market Capitalisation of N200bn (US$1.36bn) in 2006;
grew to N550bn ($3.74bn) in 2008
• Today, it is less than N150bn
• Lost substantial capital to the 2008 meltdown
• The 2012 earnings performance suggests a delayed
recovery – Average PAT of N448m and EPS of 7 Kobo
• Market capitalisation is a discount of 40% of book
value.
19
Sector Profile
• It is not very popular
• Its reputation has improved but still needs
further improvement
• There was a lot of optimism after the banking
consolidation with the expectation that
insurance will be the next growth sector. This
hasn’t materialised.
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PART 3:
REPOSITIONING THE INSURANCE
SECTOR
WHY IS THE INSURANCE SECTOR
UNDERPERFORMING?
22
INTERNAL FACTORS
• Ethical Standards
• Impaired Capitalisation
• Fragmented Industry With Many Marginal Players
• Weak Growth Strategy
• Industry cohesion is strengthening, but still sub-optimal
• Gaps in Human Capital Management Strategy
23
EXTERNAL FACTORS - OVERVIEW
• Insurance is more positively correlated with economic
well-being of the individuals than it is to general
growth rates
• Hence growing the insurance business becomes more
challenging in an economy facing high poverty intensity
and poor quality of life. budget theme is critical for the
insurance sector
• It is thus important for the insurance sector to address
the key question: How can we achieve substantial
growth within the current scenario of high poverty
intensity and low quality of life?
24
GDP (PPP)OF SOME COUNTRIES ($)
COUNTRY
GDP
COUNTRY
GDP
COUNTRY
GDP
USA
48,110 Brazil
11,640
Nigeria
2,964
China
7,319
3,650
S.Africa
10,960
Japan
33,670 Russia
21,920
Egypt
6,280
Germany
39,460 Mexico
16,590
Algeria
8,660
France
35,250 Indonesia
4,640
Angola
5,920
UK
35,600 Turkey
17,110
Morocco
4,950
Italy
32,670 Saudi
Arabia
24,270
Ghana
1,870
Canada
40,420 Malaysia
16,050
Kenya
1,710
Norway
60,390
Ivory Coast
1,790
Singapore
60,690
Cameroun
2,360
Botswana
14,750
India
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THE KEY STRATEGIC QUESTION FOR
THE INSURANCE INDUSTRY
• Are we going to be beneficiaries of economic
growth growth?
• Or
• Are we going to be both catalysts/engineers of
growth and beneficiaries of same.
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HISTORICAL PERSPECTIVE
• So far, the insurance industry has been peripheral to
major transformational initiatives in key sectors
• The results of this approach are evident in the current
profile of the sector
• The Power sector is set for a major transformation. It
will be slower and more difficult than the Telecoms
sector
• But it will dwarf the telecom sector within a decade
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8 PERTINENT QUESTIONS
1. Based on current policies, which sectors will drive growth
over the next 10 years in Nigeria?
2. In which of these sectors will the insurance sector play a
leading or catalytic role?
3. Are there sectors crucial for the growth of the insurance
sector but which are yet to be positioned for growth?
4. How can the insurance sector be a catalyst for such sectors
in 3 above?
5. How can we be positioned to be major investors in those
sectors, such that investment will drive premium growth?
6 PERTINENT QUESTIONS
6. How can we champion the delivery of 10 million affordable
owner-occupier homes over the next 20 years?
7. How can we increase the number of car owners by at least
100,000 every year?
8. Which of these will be industry initiatives and which will
be driven by companies individually?
TWO KEY STRATEGIC QUESTION FOR
THE INSURANCE INDUSTRY
• Are we going to be beneficiaries of economic
growth growth?
• Or
• Are we going to be both catalysts/engineers of
inclusive growth and beneficiaries of same.
• To what extent is quantum growth dependent on
collaborative industry initiatives?
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ISSUES TO BE ADDRESSED IF THE
SECTOR WILL BE CATALYTIC
1.
2.
3.
4.
5.
Strong vision at the industry level
Strategic industry leadership
Recapitalisation
Human Capacity Building
More effective regulatory enforcement
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