New insurance products boost coverage in Nigeria


With many competing firms offering a robust suite of product offerings and related services, the insurance market in Nigeria is vibrant and growing. Like many sectors across Africa, however, domestic insurers often lack the capacity to underwrite the majority of risks stemming from the main drivers of the economy. Nigeria’s primary revenue generators – oil and gas, and the mining sector – require a level of coverage that is currently beyond the capacity of many domestic insures. This is especially true in the reinsurance market, which is dominated by foreign players.

As a result, the National Insurance Commission ( NAICOM) is seeking ways to increase the capacity of insurers under its purview. Over the course of 2017 NAICOM will institute risk-based supervision across the industry, which is expected to enhance the sector’s ability to effectively assess and manage risk, and encourage firms to significantly raise their capital buffers.


The insurance sector comprises 56 insurers, representing a mix of life, general and reinsurance providers. While there are a handful of large companies, most are small players. As was the case for the banking sector prior to significant consolidation several years ago, the insurance industry is fragmented. According to the latest data from NAICOM, the 10 largest general insurance companies accounted for over half (56.2%) of total gross written premiums (GWPs) for 2015. In the life insurance segment, the top three firms were responsible for 54.1% of GWPs with the remaining 45.9% distributed among 19 smaller firms.

Despite the highly fragmented sector, insurance GWPs have been rising in recent years. The life segment, which held N90.1bn ($318.4m), or 31% of the market, in 2015, has experienced stronger growth in premiums than non-life segments, which accounted for N198.4bn ($701.1m), or 69% of the market. Both areas witnessed very strong growth in 2011, but have failed to recreate that expansion in subsequent years. Life insurance recorded a 34.8% increase in GWPs in 2011 over the previous year, compared to just 6.8% in 2014 and 5.8% in 2015, the latest figures available. While it wasn’t as strong as the life segment, non-life policies nevertheless experienced healthy growth in 2011, with GWPs increasing by 11.7%. Growth in recent years, however, has been disappointing, with the non-life segments contracting by 0.1% in 2014 and growing by just 1.3% in 2015. GWPs for the industry as a whole were up by 1.9% in 2014 and 2.7% in 2015.

An examination of net written premiums (NWPs), which excludes the amount ceded to reinsurers, is a better way of measuring retained revenue and tells a different story of the industry. Non-life NWPs declined in each of the three years up to 2015, falling by 5.5% in 2013, 5% in 2014 and 2% in 2015. By contrast, the life insurance market has fared much better. Following a 4.3% drop in 2012, NWPs then rose again in subsequent years by a remarkable 46.6% in 2013, 8.2% in 2014 and 5% in 2015. When considering life and non-life segments together, NWPs rose by 0.8% in 2015.


Given the size of the Nigerian population – 189m in 2017, according to IMF estimates – the potential insurance market is massive. To this point, Adewale Foster-Aileru, head of strategy and investor relations at Cornerstone Insurance, told OBG, “Most operators are now beginning to see that retail is the way forward. When you look at the increasing population in Nigeria, one of the attractions for foreign players is this great retail population. Some operators are beginning to channel their energy and focus to retail, while still appreciating the corporate market.”

Nevertheless, the industry has yet to lift insurance penetration above 1% of GDP. Paulinus Offorzor, technical head at Universal Insurance, argues that education is the key to overcoming this hurdle. “People are aware of insurance, but what they need is insurance education,” he told OBG. “They need to know why they should buy into insurance products. This is a major challenge that we are facing.” The sector is exploring ways to connect the value of insurance to segments of the retail community that have very little interaction with insurance beyond compulsory products such as vehicle liability coverage. Offorzor outlined a strategy for the industry to more aggressively pursue what he refers to as the mass market. “Insurance companies are moving into the homes of the public and getting involved in their lives. You turn on the television, you see insurance. You go to the mall, you see one or two adverts. They are literally breaking into the mass market.” Rather than relying on traditional marketing platforms for the insurance sector, companies are beginning to seek out new customers wherever they happen to be.


Another round of consolidation is likely in the sector, the first of which came in the wake of the 2008-9 global financial crisis and saw the number of insurance companies operating in the country cut in half. More stringent capital requirements dictated by NAICOM are seen as the underlying catalyst for the expected consolidation. In an 18-month period that was to end in March 2017 but was extended to June 2017, NAICOM mandated that insurance companies increase their capital base from N2bn ($7.1m) to at least N3bn ($10.6m) in order to stay in business. With little prospect of issuing fresh debt or equity due to ongoing weaknesses in the nation’s capital markets, acquisitions by larger foreign entities looking to enter Nigeria’s mostly untapped insurance market or mergers among smaller domestic companies appear to be the most likely routes to meeting the stricter capital requirements. Foreign companies that have already indicated interest in beginning or expanding operations in Nigeria include US-based Liberty Mutual, AXA Group of France and Old Mutual of the UK.

Beyond the updated capital requirements, when compared to the banking sector, many insurance companies lack the scale necessary to deliver their products and services to an economy as large as Nigeria’s. Kabir Okunlola, a partner at KPMG Nigeria, told local media that of the approximately 56 insurance companies. By comparison, the banking sector is made up of fewer than 25 banks. The more consolidated nature of the banking industry allows lenders to make larger investments in areas like product development and technology, and therefore take on levels of risk that cannot be matched by the insurance sector.

Consolidation has already begun. Sunu Assurances Vie Côte d’Ivoire acquired a 60% stake in Nigeria’s Equity Assurance, and Liberty Holdings of South Africa purchased 75% of UNIC Insurance in 2016. On the domestic front, Insurance Resourcery Consultancy Services acquired 75% of Great Nigeria Insurance in the autumn of 2016. Additionally, Standard Alliance Insurance merged with Standard Life Assurance at the beginning of 2017, forming a single company to offer life and non-life coverage. In June 2017 Cornerstone Insurance acquired FIN Insurance, which will continue to operate as a wholly owned subsidiary. Larger players are also pursuing merger and acquisition activity, with at least five firms reportedly receiving the green light from their boards to enter into talks. The underwriters seeking merger or acquisition targets are AIICO, Branco Insurance, IGI, Lead Insurance and Royal Exchange.

Foreign Presence

While the domestic industry does have a large footprint, certain areas of the Nigerian insurance sector are home to a significant foreign presence, most notably reinsurance. Due to the low underwriting capacity of the local market, the majority of reinsurance services is provided by foreign companies. According to local media reports, only 15% of reinsurance is issued by Nigerian providers. Africa Re, which is headquartered in Nigeria but services much of the continent, makes up 20% of the pie, but the majority of business are held by European firms.

However, Africa Re is actively working to expand its share of the Nigerian reinsurance market. Unlike European reinsurers, it allows premium payments to be made through Nigerian banks, denominated in naira, which removes the currency risk inherent to other foreign reinsurers. Additionally, it is working with NAICOM to expand the capacity of local insurance firms and has already invested over $90m in the local sector.

These moves could signal the growth of more attention by foreign firms. “We are seeing increased interest by international players seeking to create a presence in the Nigerian market, something that we believe is also happening in other African markets,” Nick Zaranyika, CEO of Total Health Trust, told OBG.


Much like other sectors of the economy, technology is playing an increasingly important role in the arena of insurance. “The future of insurance is in leveraging technology,” Foster-Aileru told OBG. “The banking sector made banking more convenient through the use of ATMs, mobile banking and other technologies. We need to make insurance more convenient as well. We need to provide more ways for people to connect with us, and not necessarily only through brick-and-mortar locations,” he added.

Aiming to replicate the technology shift that payment processing company Interswitch brought to the banking sector, Pinet Informatics, a prominent internet service provider, launched an online insurance marketplace in early 2017. Website InsuranceMarket. ng matches licensed insurance dealers with consumers, allowing potential clients to compare prices and purchase a variety of insurance policies from their home computer, mobile phone or other internet-enabled device using a credit or debit card. Pinet Informatics views this platform as a major tool in the fight to materially deepen insurance penetration in the country.


The bancassurance model encourages banks to partner with insurance companies for greater cohesion in the financial space. This alliance allows customers to initiate policies and pay premiums directly through the bank at which they hold an account, rather than building a separate relationship with an insurance company, and was crafted as a way to boost insurance penetration in the country. While it has been slowly gaining traction in Nigeria, bancassurance initially failed to take off. In a blow to the programme, NAICOM suspended bancassurance partnerships in August 2016 due to a dispute with the Central Bank of Nigeria (CBN), which refused to allow NAICOM to issue insurance licences to banks. The CBN and NAICOM were able to reach an agreement in March 2017, and the programme was reinstated that month after the regulators both issued guidelines related to it.

First, the CBN issued a circular in March 2017 prohibiting banks from offering banking products that incorporate insurance features, and disallowed the offering of free premium payments as a part of any of their banking products. Only referrals through an established bancassurance agreement are allowed, with banks not partaking in the marketing or underwriting aspects of their partnered insurance companies.

For its part, NAICOM released new guidelines the following month that instituted licensing fees of between N500,000 ($1770) and N2.5m ($8840) for all insurance operators interested in offering products through bancassurance. The body also requires a 12- to 18-hour training session for insurance company employees in the programme. Together, these new rules establish a separation between the banking and insurance sectors.

State Coverage

Often a pioneering area in the adoption of new policy tools, Lagos State announced that it is researching ways to include private insurance providers in the management and financing the health insurance scheme it intends to launch in late 2017.

The insurance programme, signed into law in May 2015, will be compulsory for all Lagos residents and will provide health screenings, primary care, treatments and surgeries for the more than 23m residents of the state. The annual premium for a family of up to six persons – payable in monthly instalments – is estimated to be N40,000 ($141). For individuals, the annual premium will be N8500 ($30). The state has also established the Lagos State Health Fund, which will cover the premiums of residents who cannot afford to do so themselves. In addition to the participation of private health insurers, primary care centres will comprise both public and private medical providers, and residents will have the option to choose between the two. The state plans to launch a new agency specifically tasked with managing the new health programme.

Beyond providing the citizens of Lagos State with greater access to quality health care, the larger aim is to position Lagos as a destination for medical treatment for those elsewhere in Nigeria and broader sub-Saharan Africa. At present, wealthy residents typically travel to Europe or the US to obtain a level of health care not currently available in Nigeria. Not only is this so-called medical tourism far outside the means of the average Nigerian, it is also a drain on the country’s financial resources. Residents seeking medical attention abroad must first obtain US dollars or euros to cover their travel and treatment, thus contributing to currency flight at a time when the government is seeking ways to attract more foreign exchange to Nigeria.

Elsewhere, the governor of Oyo State unveiled a new state-wide health insurance programme in May 2017 that will be launched later in the year. With an initial registration fee of N200 ($0.71) and monthly premiums of N650 ($2.30), Oyo State residents will be able to access free health care at any state-run health centre. Pregnant women and children under the age of five will be exempt from all premium payments. The new programme, which is expected to cover approximately 1m residents, will help with positioning the state as a destination for quality health care in the country.

Islamic Insurance

Takaful, a type of insurance that adheres to sharia law, is another segment that will continue to gain traction, just as Islamic – non-interest – finance is slowly beginning to take hold in the Nigerian banking space. Nigeria’s Muslim population, which is roughly 50% of the total, makes takaful an attractive possibility. Although a handful of insurance companies have already launched takaful products, the line is not without risk. “Takaful is not yet where it should be. It’s a huge area of opportunity, especially among those that live in the northern states. We must look for ways to fully engage and penetrate that market, but it’s not going to be easy,” Foster-Aileru told OBG. “The northern territories are not as accessible as those in the southwest, but there are many people there that need these kinds of products. Takaful has huge potential, but it is still very far from where it needs to be.”

As a part of the sector’s retail strategy, reaching the majority-Muslim populations in the relatively remote areas of the north will challenging. Insurance firms that have built expertise in traditional insurance products must design products that are both sharia-compliant and aligned with the needs of the population.


In order to bring more Nigerians into the insurance fold, the industry is experimenting with micro-insurance that adjusts coverage levels so premium payments are more affordable to more of the population. “Micro-insurance is another opportunity to break into and make use of the opportunities presented by the population,” Universal Insurance’s Offorzor told OBG. However, financing to develop the sector has been a challenge, as return on investment takes a longer time and is expensive. “You must have the structure and the investors that understand the concepts of micro-insurance for them to be able to be patient enough. The typical investor wants their investment to start yielding returns right from the day they invests, but micro-insurance requires a longer period. Yes, it has taken off in Nigeria, but we have not really seen the success stories yet,” Offorzor added.

Given the very small premiums, turning micro-insurance into a profitable endeavour requires building a significant volume of consumers. This process takes time and involves introducing, educating and gaining the trust of a population that previously has little previous experience with insurance. The success of this effort will require patience, and an approach to marketing and product development that may differ substantially from that of traditional insurance.

Another important component of the success of micro-insurance is likely to hinge on insurance firms’ ability to tap into consumer-facing technologies, like mobile phone applications. Similar to how the banking sector greatly expanded financial inclusion in the country through the use of mobile money, insurance companies are increasingly turning to mobile offerings as a means to connect with consumers outside of the traditional avenues of communication.

New Products

New products serving niches of the economy are also being developed to build business. One such product was introduced in December 2016 by AXA Mansard Insurance, a subsidiary of Axa Group, in collaboration with global ride-hailing giant Uber. Under the new line, in addition to the vehicle insurance all drivers in Nigeria must have, AXA Mansard, offers insurance that covers riders’ medical expenses in the case of death or disability as a result of travelling with Uber. The premiums for this insurance are fully provided by Uber and cover a rider during any trip initiated through the Uber mobile app.

Other products were unveiled in early 2017 by Wapic Insurance. These new products cater to Nigeria’s burgeoning middle class through its Smart Investment brand. The new line of investment-linked products includes two new life insurance options, a school fee guarantor for children in the case of death or illness of one or both parents, a wealth accumulation product designed for adults during their years as members of the labour force and a retirement saving product with an embedded insurance cover.


Tapping into the technologies necessary for cracking the retail market will be a considerable focus of the insurance sector in the years to come. The sector can expect investments in new products, mobile technology and alternative media outlets to reach potential customers at the base of the economic pyramid. The success of educational campaigns targeting that population will also be a major factor that will determine the success of increasing penetration in the country, Furthermore, Nigeria’s young and growing population will continue to be a force driving foreign investment into the insurance sphere. The development of risk-based supervision and the more stringent capital requirements that will accompany it are expected to strengthen the sector financially.

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The Report: Nigeria 2017

Insurance chapter from The Report: Nigeria 2017

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